The figures were released by the Bank of England, and showed that in December new borrowing increased by around £52 million.

Officials believe that the main driver behind the increase in consumer borrowing in December was increased borrowing on credit cards. It is thought that the run up to Christmas and New Year fuelled additional spending on credit cards, as consumers rushed to buy gifts and other items for the festive season.

In addition to this the January rise in VAT may have also sparked a purchasing rush on items such as big ticket items for which many may have used credit cards to fund the cost.

Over recent months reports have shown that consumers have been focusing on paying off their debts rather than increasing their debt or saving money, and this has certainly been the trend during the economic and financial downturn.

However, December saw this trend reverse as many people hit their credit cards with a vengeance, thus driving up consumer borrowing levels.

One industry official, Andrew Goodwin from Ernst & Young, said that there may a relapse following the increase in consumer borrowing. He stated: “The small increase in consumer credit is likely to be connected to consumers bringing forward purchases to avoid the VAT increase and a relapse is likely next month. The household sector is continuing to deleverage and we expect consumers to provide little support to the recovery as it develops this year.”

New borrowing on credit cards and loans on the rise is a post from: Glitec Loans

The news is not all good, as rates on personal loans are still at five year highs. However, according to reports they have now fallen to their lowest level since the Bank of England cut the base rate to its current low in March of last year.

A number of lenders are said to have cut the rates on their personal loans recently, which will prove good news for anyone that is looking to borrow money. The loan rate cuts have been applied by both mainstream lenders and some other lenders such as supermarket finance sectors, and amongst the lenders that have reduced their personal loan rates so far are Nationwide, Halifax, Sainsbury’s, and Tesco.

Based on Moneysupermarket.com tables the average rate that is now charged on the top ten loan deals is now 8.35 percent on a loan of £7500. This is the second highest rate recorded since 2005, when the average rate was 6.3 percent, with the highest being seen at the start of last year when the average rate was 8.42 percent.

It has also been pointed out that in 2005 the base interest rate was far higher, and this meant that the profit margin for lenders was only slight coming in at around 1.55 percent.

These days, however, with the base rate being so low the profit margin for lenders has soared to around 7.85 percent. Many of these loans are also only made available to those that have the best credit ratings, and those that have blemished on their credit records can expect to pay a significantly higher rate or may find that they cannot quality for a loan at all.

Reductions being seen in personal loan rates is a post from: Glitec Loans

In the past few years, banks and credit card companies have come under fire for forcing loans on consumers and raising the credit limits without being asked to do so.

However, many of the consumers who have received letters by mail telling them that they qualified for a loan are surprised to find that when they do apply now, they have been refused and ask why this is so.

As banks are left with bad debts due to borrowers’ inability to pay, they have become more discerning about the consumers for whom they approve loans.

The best deals with the lowest rates of interest are reserved for the lenders’ best customers who have repaid their loans regularly in the past, have not missed any payments and who do have an income to support their debt to income ratio.

According to the largest credit card company in the UK, Barclaycard, bad debts assumed by the lender have risen to £696 million – 33% more than it was in the past.

Every customer that applies for a loan undergoes an application process. This involves using information gained from the borrower’s credit record and application to calculate a credit score. The number of this credit score will determine your eligibility to borrow money. It is also important to keep in mind that different lenders use different criteria to arrive at this score so that while you may not qualify for a loan from one lender, you may from another.

If you do not have an established credit record, you will find it difficult to gain approval for a loan. This is because the lender does not have any information on which to base your payment records in the past and is one of the main reasons why first-time borrowers are turned down for a loan.

According to Jill Stevens, the affairs director at Experian, one of the credit reference agencies, “If you have no track record, they cannot tell how you might behave in future and could mark you down because they have no evidence of your being someone who manages credit well.”

For those with no credit records, it is essential that they look at taking out a credit card or store card and using it for a small amount of money. When you start making regular payments, then you will establish a credit history and lenders will be able to calculate a credit score based on this information.

Applying for too many loans is very harmful to your credit record and will have a direct impact on your ability to take out a loan. When lenders take a look at your record and see that you have made several applications within a short period of time, they will assume that you are in financial difficulty and will turn down your loan application.

If you have had financial difficulties in the past and have missed or late payments on your record, you will also encounter difficulty in being able to borrow money. When this information comes to the attention of a potential lender, you are seen as a poor risk to repay.

In these uncertain economic times, lenders want to minimize their risk and will therefore turn down your application. It is important to keep your payments up to date and repay your debts if you hope to be able to borrow money in the future.

Why You May be Turned Down for a Loan is a post from: Glitec Loans

Many banks have now had to be bailed out using taxpayers’ money, but although one might think that there would be some gratitude from the banks for this bailout from the public purse rather than being sympathetic to the needs of consumers, banks seems to be using them to try and recoup their own losses.

There are a number of ways in which the taxpayer has ended up paying for the mistakes that the banking industry has made, and in one way or another most of us will find ourselves suffering in some way whilst the banks do all they can to claw back revenue and shore up their own finances. Some of these are outlined below:

Borrowing

Borrowers have really suffered as a result of the blunders that the banking industry has made.

Whilst banks are being encouraged to stop lending irresponsibly, which is partly what got the industry into the mess that it is in, they are also being encouraged to start lending again the eligible consumers and businesses in order to help the economy to recover.

However, recent reports have shown that in order to shore up their own finances banks are strictly limiting the amount of money that they will lend out on things such as mortgage, and once the allocated funds have been used those that apply for finance afterwards are likely to be turned down even if their credit rating is excellent.

In the past someone with good credit would have no problem getting finance, but these days it seems to depend on the time of day that you apply and whether or not the banks has used its daily allocated funds by then.

Loans and mortgages

Over the past five months the base interest rate has been at an all time low of just 0.5 percent, which is just a tenth of the level that it was at just over a year ago. However, despite this rock bottom base rate the interest rates that lenders seem to be charging on loans and mortgage seems to have no link to the base rate.

One industry official summed it up by stating: ‘Reducing interest rates to these low levels was intended to make borrowing cheaper, to help kick start the economy. Evidence shows that this is just not happening.’

However, the British Banker’s Association states: ‘The cost of borrowing reflects more than the Bank of England base rate. Various factors affect the price of lending. Banks’ costs have gone up, and there is less left to lend. More people default in recessions and banks can take longer to get their money back as they help customers by rescheduling repayments. They are paying relatively more for their money as a result of both competition for savings and scarce and expensive wholesale funding.’

Credit cards

Credit card customers have also been affected by banking blunders. Some cardholders have seen their interest rates rocket, others have seen their credit limits slashed, and some have even seen their accounts cancelled. Getting a credit card has become increasingly difficult even for those with pretty good credit. Also, banks have been increasing various fees on credit cards, such as annual fees, cash transaction fees, foreign fees, and a range of other charges as they see fit.

In addition to this banks have acted cunningly by reducing the minimum required repayment for some cardholders. Although this may seem like it is designed to help consumes in the current climate, what it actually means is that you will spend far longer paying off the credit card debt and pay far more in interest to the lender.

Some of the ways in which banks are getting more money from consumers is a post from: Glitec Loans

Darling said that he was very concerned that the rates being charged on loans to small firms were far too high, and in order to discuss this he called a meeting with banking industry executives last week at Downing Street. Darling said that whilst the base interest rate had dropped to its lowest level in history, at just 0.5 percent, loan rates appeared to be continually rising.

Darling went on to state that the government did not bail out the banking sector ‘out of some charitable act’ and he added that banks now had a responsibility to ensure that lending levels were restored. A number of major banks had to be bailed out by the government, with the use of taxpayer’s money, following the onset of the credit crunch, and the chancellor said that it was now time for banks to take responsibility and ensure measures were put into place to get lending back to reasonable levels.

Darling said: “The public will not understand it if they [the banks] don’t seem to be doing their part. I want them to rebuild their balance sheets… but at the same time, because of the particular circumstances we’re in now, because of the fact we’ve got this recession, we also need them to lend money. And that’s why we re-capitalised them to do that, and that means they’ve got to live up to the promises that they made.”

An official from the Federation of Small Businesses said that the chancellor had been “quite right to haul in the banks”. He added: “It is hugely important that Mr Darling keeps tabs on the banks to ensure they are lending money to firms, and at fair rates. Firms need to be able to reap the benefits of the historically low base rate.”

Darling concerned over rates charged to small firms is a post from: Glitec Loans

Since the global credit crunch stricter regulations over lending have meant that many people have been unable to get a mortgage loan, which has had a serious negative impact on the property market and property sales levels.

The Prime Minister discussed 100 percent mortgages with the Financial Services Authority earlier this year. These mortgages were once popular with first time buyers who had little or no cash to put down as a deposit on their mortgage, but Gordon Brown wanted the FSA to consider banning mortgages with such high loan to value rates.

He said that there were higher risks with any mortgages that required a deposit of less than 10 percent from the borrower.

However, executives from the FSA have recently told a parliamentary committee that if this action is taken it could seriously affect the chances of the recovery of the property market.

The FSA said that these measures would mean that first time buyers were still frozen out of the property market, and that this would result in confidence levels dropping again just as they had started to increase.

Before the global credit crunch 100 percent and even 125 percent mortgages were widely available to first time buyers, who were able to get onto the property ladder without any deposit with these mortgages. However, since the financial crisis these deals have disappeared from the shelves, with lenders not demanding sizeable deposits from all borrowers.

Stringency over home loans relaxed claims report is a post from: Glitec Loans

In fact, the report claims that loan and mortgage interest rates have been rising at record levels, with the average rate on a five year fixed rate mortgage increased by 0.63 percent to 5.56 percent in June.

The June increase is said to reflect the highest increase in fourteen years when records began. During the same month the rates on personal loans also increased, with the average rate on a £10,000 personal loan rising by 0.97 percent for the months, taking the average rate to 10.32 percent.

Again, this was said to the largest increase on record. This comes despite the fact that the base interest rate has been held steady at just 0.5 percent since April of this year, which is just a tenth of the level that it was at in October of last year, before a series of dramatic base rate cuts.

The government has been taking various measures that include ploughing huge sums of money into the economy and the financial sector in a bid to try and encourage financial institutions to lend and try and reduce borrowing costs for consumers. However, despite this action the rate of interest being charges on many loans seems to be going up.

However, one industry official said that rates had not fallen at all ‘but have risen further as lenders respond to increased demand by pushing rates up even more’.

Mortgage and loan rate continue to rise is a post from: Glitec Loans

Over the past six weeks or so it is claimed that some lenders have increased the average rate of interest charged on their personal loans by 1 percent, despite the fact that the base interest rate is still at its lowest level ever at just 0.5 percent.

One price comparison website claims that the average personal loan rate now stands at 9.07 percent, which is an increase from 8.74 percent a year ago, when the base interest rate was ten times higher than it is now.

One industry official said: ‘Hiking loan rates in the current climate is just making an already difficult situation practically impossible for consumers. Much as we understand that the banks are struggling, these are big hikes to swallow. With all eyes on mortgages and savings, it seems loan providers are slipping under the radar slightly.’

Around one and a half million consumers are said to have opted for a personal loan last year to consolidate other debts in a bid to reduce monthly outgoing. However, with loan rates rising like this many may find that this is no longer an affordable or viable option, leaving them to look at other solutions to reduce their debt repayments.

One consumer stated: “I recently looked at taking out a personal loan, and was shocked at the interest rates being charged. With the base rate so low I thought that personal loan interest rates would have also fallen, but this simply isn’t the case – quite the contrary in fact, with most of them having increased.”

Banks increase profits through increasing loan rates is a post from: Glitec Loans

Since the onset of the global credit crunch the availability of credit cards has dropped through the floor for many consumers, especially those with low incomes or bad credit, and in the current economic climate many may find themselves having to look elsewhere if they are desperate to get finance.

Industry experts are worried that as credit card and loan availability continued to dwindle during the recession a rising number of Brits will turn to loan sharks for their financial needs, and could then find themselves getting burned as a result of the crippling interest that these sharks demand even for relatively small loans.

Whilst strict regulations and laws have been put into place with regards to loan sharks experts reckon that with the rising number of traditional lenders being more stringent with lending this practice is actually on the increase.

A recent report from the New Local Government Network claimed: “The diminished availability of regulated sub-prime credit is creating conditions where a sizable number of people have little option but to borrow from illegal sources. At least 165,000 people already use loan sharks in the UK and we can expect the number to rise sharply.”

It was also claimed in the report that there are certain areas where consumers are more likely to fall victim to loan sharks, and these areas were Stoke On Trent, Gateshead, and Manchester.

Credit card drought could spell good news for loan sharks is a post from: Glitec Loans

This means that in the vast majority of cases loans were approved by HBOS without proof of income that would determine whether or not the borrower would actually be able to make repayments on the loan.

The claims were made by a former senior employee of HBOS, which has now been taken over by Lloyds TSB after becoming another financial victim of the credit crunch and suffering huge losses.

The former senior employee, Michael Bolton, reportedly stated: ‘HBOS had five brands, all offering products without proof of income. It was offering a lot of self-cert, a lot of buy-to-let that needed no proof of income and a lot of Halifax’s mortgages were ‘non-verified income’ loans, which was essentially fast track. Before the credit crunch, as much as 80% of HBOS’ loans were going through without full proof of income.’

One mortgage broker said that before the global credit crunch hit the nation in 2007 many lenders who dealt with mortgages and loans tried to fast track applications by using the credit scoring system.

In the case of HBOS many loan applications were fast-tracked in this way, being approved at the time of the application in many cases, which meant that a traditional underwriter that would normally check things such as proof of income would not be used.

The broker stated: ‘A lot of mainstream loans were fast-tracked in the past, but HBOS went further than most lenders in that area of the market, in relation to bigger loans, so I would not be surprised if 80% were without full income verification.’

A spokesperson from the Halifax responded to the claims by saying: ‘Our underwriting approach is carried out in a responsible manner. We have one of the best underwriting approaches within the mortgage market, and the performance of our prime mortgage book is broadly in-line with many leading competitors in the market.’

No income check with 80 percent of HBOS loans is a post from: Glitec Loans