Byline: LIZ PHILLIPS
AFTER the temptations of the January sales and the jingling of tills over Christmas, the reality of having run up huge debts is hitting home.
We are expected to have spent [pounds sterling]90 billion on credit cards in December alone.
Debt advice charity the Consumer Credit Counselling Service (CCCS) said there was a 25pc surge in the number of calls for advice in the first fortnight of 2004 compared with the same period last year.
One way to handle debt is to move expensive loans to a lowrate personal loan. The interest rate is fixed at the outset and, unlike credit cards, you have to pay a set amount each month to clear the debt in full over the time of the loan.
Frances Walker of CCCS says: 'Consolidating debts on to a personal loan can be a good way to handle them - you have the discipline of clearing the debt in full, provided you avoid running up more debt on your cards.' But she warns against using consolidation loan companies, which turn an unsecured loan into a loan secured on your home.
'Often these companies are not concerned about your ability to repay. All they care about is the amount of equity you have in your property and lend close to that amount,' she says.
Unsecured personal loans, which won't put your home at risk, are available from all major banks and building societies, with interest rates from around 6pc for [pounds sterling]5,000. But four out of five lenders charge penalties for repaying the loan early.
Since 70 pc of borrowers clear loans early, this amounts to [pounds sterling]332 million paid in penalties in 2002, according to internet bank Egg. Barclays, Egg, Goldfish and Virgin are among those that don't charge redemption penalties and calculate the interest daily.
Early repayment penalties are typically two months' interest.
But the Department of Trade and Industry is putting a stop to this practice when it amends the Consumer Credit Act.
Redemption penalties will be capped at one month. However, lenders can still get around this by putting off your settlement date by 28 days, thus still charging you two months' interest.
An arcane method of charging interest called Rule of 78 will be abolished retrospectively. Rule of 78 means you pay off most of the interest first before you start repaying the loan.
If you have a good credit rating, cahoot, Goldfish and Leeds & Holbeck are among the cheapest, according to data compiler Moneyfacts, with loans costing 5.9 pc and 6.2 pc respectively.
But cahoot levies penalties. Its loan costs [pounds sterling]151.88 a month for [pounds sterling]5,000 borrowed over three years.
The total interest charge is [pounds sterling]468.
Other penalty free lenders are Goldfish and Leeds & Holbeck at 6.2 pc, costing [pounds sterling]152.56 a month ([pounds sterling]492 interest), Northern Rock charges 6.3 pc, costing [pounds sterling]152.79 ([pounds sterling]500 interest) and Nationwide's rate is 6.7 pc, costing [pounds sterling]153.70 ([pounds sterling]533 interest).
l.phillips@dailymail.co.uk
FILM producer Sacha Van Spall, 34 (pictured with friend Suzanne Bettley), has taken out one loan to pay off all his debts on two credit cards and two other loans.
He's borrowed [pounds sterling]15,000 over five years at an interest rate of 7.9 pc from Virgin Loans. It costs him [pounds sterling]300 a month.
Previously his two personal loans - one from the Co-operative Bank and the other also from Virgin - cost him [pounds sterling]375.
Sacha, from north London, says: 'If you include the credit card repayments, I'm saving myself even more. I probably spent about [pounds sterling]1,000 over Christmas.
Now I'm being more careful and cutting back until I've got my debts down a bit.
'And if I can repay the loan early, I won't have to pay any penalties.'
Комментариев нет:
Отправить комментарий