With lenders becoming more strict over who they give money to, it’s been pretty tough applying for credit in the last year or so.

That is reflected in a new survey showing that over 5% of us have been rejected for a mortgage or loan application since the beginning of 2007, with 13% of us making at least four applications before we were successful!

The survey was carried out by GE Money Home Lending also suggested that a further 1% of us who were rejected, had to apply for a mortgage or loan at least 8 times before we were accepted.

Because of the trend of tightening lending criteria due to the credit crunch, many people with healthy credit scores are being classed as ‘higher risk’; this means that many of us were finding it more difficult to secure the credit they needed.

Nearly 30% of us gave up after being rejected the first time, but a further 12% of us went on to make multiple applications with no success.

• Multiple applications are risky

The risk with making multiple credit applications is that it could increase your risk of being turned down, as failed applications could be logged on your credit report and count against you.

Mark Maguire, spokesman for GE Money Home Lending, said multiple failed applications can be time consuming and detrimental to a borrower, saying:

"As lenders continue to amend the profile of the borrowers they seek to attract by changing their acceptance criteria, it is a good idea to seek help from an adviser.”

• Get independent advice

In recent months, some lenders who traditionally offered better rates through advisers to attract more business stopped doing so, making it more attractive to make an application direct to the lender. However, the trend appears to be reversing once again with better rates once more appearing through advisers, as Maguire pointed out:

"Independent advice remains invaluable as it still remains very difficult to navigate the market and get an acceptance for a loan.”

He also added that it was important to check your credit record to make sure you don't have any errors, or dispose of the half dozen credit cards lying unused in your bottom drawer. Something like that could be the difference between a yes and being declined.

Historically it is the number of searches that is most damaging to your credit file but the higher frequency of searches from firms like mobile phone companies means the key issue now is how recent the latest search was, and not the number of searches.

• Speak free of charge to an independent debt adviser who can provide you with advice and solutions to help you resolve your debt and credit problems
• See your free Experian credit report and start putting your financial bad habits behind you.

Every day seems to bring more gloomy financial news doesn’t it?

Energy prices shooting up, our personal debt ever increasing, property prices plummeting and the cost of living just getting to stupid levels…

In all of this though, its time to stand up and be counted, because many of us actually believe society is as much to blame as the Government or the banks!

According to a study by money website Fool.co.uk, 29% of us believe our banks are responsible for today’s financial mess. Almost all of us (94%) said we have had our credit limits raised without even being asked!

The Blame Game

But banks aren’t the only ones being blamed for the credit crunch:

• 22% of us place responsibility squarely on the shoulders of the Government
• 23% of us blame ourselves
• 26% of us reckon that consumer culture is the root of it all and believe that a desire to “keep up with the Jones’” has forced us to take on unnecessary debt.

The Music Stops

The Bank of England reported a massive slowdown in lending to people this week, which will be welcomed by those of us who blame banks and their irresponsible lending for the current credit crunch.

According to the central bank new mortgage approvals has slumped 70%. It is down from £17 billion a year ago to £5 billion in June. Meanwhile, total lending over the same period has halved from £31.7 billion to £16.8 billion.

Question Time

Despite this, questionable lending still goes on; 10% of us were given credit even though we had a bad credit rating. Elsewhere, 44% of us say we have been offered credit we knew we couldn’t repay, but only 16% actually accepted the credit.

Despite pointing the finger at banks and their irresponsible lending, 74% of us admit that we don’t read the small print when signing our credit agreements. Furthermore, nearly 50% of us claim to have used one form of credit to pay off another.

Need help with your debts? Check out our debt section for advice and debt management solutions.

David Kuo, Head of Personal Finance, at Fool.co.uk says:

“Both the banks and the Government have to take equal responsibility for the credit crunch; banks for peddling unaffordable loans and the Government for lulling people into believing that there would be no return to boom and bust.

“The Bank of England’s lending figures suggests that UK banks have learnt the first lesson of holes, namely that you must stop digging when you’re in one. Now the Government must learn this lesson too.

It must reject the idea that it can solve the UK's debt problem by throwing more money at it. Collectively, consumers are drowning in £1.4 trillion worth of debt, of which £1.2 trillion is mortgage debt and £233 million is unsecured loans. We now need time to pay off those loans, and it will take more than consumers hanging their heads to solve the problem.

The Government must not use tax payers’ money to lend to taxpayers. This is tantamount to robbing Peter to pay Peter. It is not only nonsense, but dangerous nonsense too.

Do you agree that the Government shouldn’t be using taxpayer’s money to lend to taxpayers?

Also, do you think that when it comes down to it, we're all to blame for the credit crunch?

© www.fool.co.uk 2008

We all know that credit cards and mortgages have been proving more difficult to obtain in the last few months.

Now, it seems that secured loans are under threat too.

This is because Barclays has withdrawn from the secured loan market.  It will stop offering new loans from August 9 but those of you who have existing loans will not be affected.

Barclays provided homeowner loans through its Firstplus business, which is best known for its TV adverts featuring Carol Vorderman.

The freeze on new business will leave its 128,000 existing borrowers unaffected, but about 300 jobs will go from a staff of 430. About 130 people, who also process loans for the Fair & Square brand, Barclayloan and Barclaycard, will be retained in Cardiff to look after existing customers. Barclays said its decision was a result of "slowing demand".

• Firstplus accused

In recent years Firstplus has generated hundreds of millions of pounds in profits for Barclays.  Firstplus has targeted those of you unable to raise further finance from your existing mortgage lenders. Because loans were secured against the property you could trigger a default and repossession if you failed to maintain repayments.

It was also revealed that Carol Vorderman is to quit after 10 years fronting their TV adverts after her contract with them came to an end.  Anti-poverty campaigners have argued that Firstplus encouraged you to over-extend your borrowings and accused Vorderman of exploiting her reputation as a maths expert in their adverts.

Two years ago moneysavingexpert.com launched a campaign to persuade her to step down, but she refused. It claimed the lender made much of its profits from the sale of insurance to protect loans. A clampdown on the sale of payment protection policies was cited by analysts as another reason for a likely downturn in profits.

Claim back your Payment Protection Insurance

Barclays has consistently maintained that Firstplus (which it acquired through the purchase of Woolwich in 2000) was a responsible lender and defaults matched the industry average.

Analysts said it was likely that there was still demand for secured loans, but that potential customers were likely to have poor credit histories. They also said it was likely the costs of raising loans had become prohibitively expensive for Firstplus as it had for most lenders.

• Squeeze on secured loans

A secured loan (or homeowner loan) is one that is secured against a property that already has an existing mortgage.  (This is why it's also sometimes called a "second mortgage".  Confusing, we know!)

In recent months, secured loan providers have been tightening their lending criteria just like mortgage lenders have. Firstplus recently reduced the ratio it is willing to lend up to, from 125% of a home's value to 95%.

Last year, Barclays tried unsuccessfully to sell Firstplus and Neil Radley, managing director of Firstplus, commented:

"In the past year we have tried a whole range of activities to develop our business but the market demand simply isn't strong enough. We recognise this is a difficult time for our people and will be providing all those affected with support and assistance."

Firstplus said the drop in business was the result of customer fears that falling house prices would leave them in negative equity after taking out a second mortgage.

Need a secured loan and having difficulty getting one? We can help you get sound advice from a loan specialist who can help you with all current loan options.

• Moneysupermarket affected

Moneysupermarket, the financial website, said the loss of Firstplus would hit its business this year and cut profits and appeared surprised that Firstplus’ move was down to a lack of business. The website has a strong relationship with Firstplus, promoting the loans across its site and had negotiated an exclusive interest rates for customers who applied for secured credit through its website.

Tim Moss, head of loans at Moneysupermarket.com, said:

"We've seen the number of applications for secured loans grow in the last year, as the credit crunch forces people to consolidate their debt. Moneysupermarket had a really good volume of applications going through before this announcement."

Rival comparison website uSwitch said the demise of Firstplus was "a huge blow to the personal loans market and another signal that the consumer credit market is quickly drying up".

A spokeswoman said the departure will leave just seven providers in the secured loan market, down from 18 last year before the credit crunch hit.

What do you make of Barclays’s decision; is it the right thing? 

And do you think the secured loans market will be the next to suffer at the hands of the credit crunch?

Why not let us know in the comments?

As money becomes a bit tight, payday loans are fast becoming a part of everyday life for many people…but they come at a high price.

A ‘payday loan’ is a sum of money less than your next payslip that can be applied for at short notice.

It enables you to borrow up to £1,000 over 31 days, which then has to be paid back; normally with hundreds of pounds added on in interest.

Now, offshore money-lending companies are targeting cash-strapped borrowers in the UK via the Internet and charging them interest rates in excess of 2,000%!

Some lenders come from the US, where payday loans have become big business since the credit crunch started over there.  One, Pounds Till Payday, operates from Malta and its website states their annual interest rates of 2,225%.

Peter Tutton, debt policy adviser at Citizens' Advice said:

'We are concerned that although payday loans have been on the UK high street for some time they are now springing up in increasing numbers online. Until recently people on a low income could still access loans from mainstream lenders but now the banks have closed their doors to higher risk customers.'

Payday loans are targeted at those of us who are desperate as we cannot get money elsewhere. No credit checks are carried out and all that is required in most cases to get the money is your bank account or debit card details. The money is paid into your account the same day and is debited straight from your account (with charges) 31 days later.

This no-questions-asked approach to lending is irresponsible, say the debt charities, tempting people to borrow money with no prospect of repaying.

Guide to Payday Loans

Need loan advice? Use our loan calculator and talk to an impartial loan adviser

Debt On Our Doorstep, a coalition of debt charities and credit unions, is so concerned about payday loans that it has tabled a motion in Parliament calling for their investigation.

Damon Gibbons, chair of Debt On Our Doorstep said:

'We would suggest that not bothering to run any credit checks or verify income constitutes irresponsible lending and would like the Office of Fair Trading to look at whether these companies should have their credit licences revoked.'

Citizens Advice came across one case of a single parent with a 10-year-old child who had multiple debts of £8,000. Her weekly income when she came to the CAB consisted of £83 statutory sick pay and £200 in state benefits. One of her debts was a payday loan, taken out online, with an APR of 1,355%.

'Her mental health was deteriorating and her financial situation was becoming increasingly impossible,' said a Citizens Advice spokesman.

Repayment scales

The following amounts are charged for every £100 borrowed:

• Pounds Till Payday £29.98* 
• Payday Express     £20.00
• Month End Money  £25.00

(* it was revealed that a £59 charge would be added to the bill if it was not repaid on time; this is not advertised anywhere on their website)

Debt advisers are worried that the squeeze on conventional credit will lead to a similar situation as in the USA, where payday loan companies are now. In some parts of Cleveland, the Ohio city hardest hit by the sub-prime mortgage crisis, all the conventional banks have been replaced by payday lenders!

Payday loans are so notorious that they have been banned in certain states; in New York, annualised rates of interest offered by any lender cannot exceed 25% But even in New York the number of so-called 'check-cashing shops' is on the rise.

The biggest payday loans company, the MoneyShop, owned by US company Dollar Financial, has 250 stores in the UK and recorded 55% lending growth in the last quarter of 2007. 

Payday loans are being heavily advertised  on the internet and are even offered via big-name financial comparison website's Moneysupermarket.com and Moneyexpert.com.

Sean Gardner, chief executive of Moneyexpert.com defended their position saying: 

'Payday loans have their place, but people have to be very clear about what they are signing up for. There are rightly serious criticisms about the product and they should come with a health warning.'

So, are payday loans a serious financial threat that should be avoided at al costs? Or is there a place for them despite their drawbacks?

Have you made use of a payday loan? How did you find the experience?

If you've ever taken out a loan, mortgage, credit card or store card, or bought something on credit, then the chances are you were sold payment protection insurance (PPI) at the same time.

Now, the consumer association Which? believes that thousands, even millions of you, may have been mis-sold PPI.

The scale of the mis-selling of loan payment protection insurance is greater than previously thought, with up to 2 million policies sold to people who may never be able to make a claim, according to Which?

Which? say that up to 30% of you taking out insurance on a loan in the last 5 years may fall foul of exclusions that would prevent you claiming.

• What is PPI?

PPI is designed to cover your debt repayments if you can't work through illness or accident, or if you are made redundant.

 

Unfortunately it is often mis-sold, costing many of us thousands of pounds for expensive insurance we may never actually be able to claim on!

Which? has been speaking out about the mis-selling of PPI for many years, but now the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) are getting involved.

• Poor selling of PPI

The FSA has already designated the insurance a priority because of the potential risks to consumers, and has fined or censured a string of companies over poor selling practices.

 

The findings by Which? are revealed just days before what is expected to be a highly critical report from the Competition Commission on, which has been investigating the £5 billion a year industry and is likely to announce plans for a crackdown on the way the policies are sold. It could even call for them to be sold separately.

Which? surveyed people who had taken out a loan or mortgage during the past five years and found that 32% of those who signed up for the insurance may fall foul of one or more of the "significant exclusions" in the small print. That could amount to between 1.7 million and 2.1 million policies.

The research also found that the average loan is £6,050; 1 in 10 of us has borrowed £10,000 or more.

A Which? spokesman commented on their survey:

"People who are self-employed or on a fixed-term job contract, for example, often aren't covered by PPI. Nor are many people aged 65 and over, or people who might claim for absences relating to pre-existing medical conditions."

Doug Taylor, Which? personal finance campaigner, said:

"We've always known that people were being mis-sold [payment protection insurance], but we were still amazed to discover the scale of it. It appears that salespeople are chasing their commissions, while their bosses are chasing profits. Where's the sense of responsibility to the customer?".

He said if someone with a loan or mortgage thought they might have been mis-sold the insurance: "nows the time to fight back".

 

Many people may not be aware that policies only pay out for a limited amount of time, often 12 months, and that credit card and store card insurance frequently covers only the minimum monthly payment.

So, if you think you have been mis sold PPI, then you need to claim it back.

Claim back your Payment Protection Insurance

Claim back your bank penalty charges

Claim back your credit card fees

Claim back your mortgage exit fees