Tough stance taken by the FCA lessens short term loan complaints

If you are at your wits end, worrying about how you can get enough cash to meet an urgent upcoming bill or expense, a short term loan or similar alternative, could well be the answer. A short duration loan (like a short term loan) can offer a genuine way of tiding you over. If you chose your loan provider carefully, it’s a good way of avoiding the more unscrupulous loan sharks who charge exorbitant amounts of interest. Going down that route can land you in more trouble than you bargained for.

short term loan complaints plummet

Short term loans have been given bad press in recent years, but thanks to a recent news article published on the official BBC news website this may now be changing. It appears the Citizens Advice Bureau (CAB) has reported that in the past 12 months, complaints regarding short term loans have dropped significantly by 45%.

The reported drop in complaints follows on the back of recent changes that the Financial Conduct Authority (FCA) has implemented. One significant change was the imposition of a “cap” on short term loans that came into force in January this year. At the beginning of last year (between January and March; before the introduction of the new cap) the number of complaints registered by the CAB during this period was 10,155. However, this year, across the same period, and as mentioned above, complaints have plummeted to 5,554 – a 45% drop.

The fact of the matter is that people often have no alternative other than to borrow money to get themselves out of tight fixes.  The mood change in terms of how loan providers are being perceived will therefore come as a welcome change to those in need. Top short term loan providers like Wizzcash.com are now offering more palatable fixes. A visit to their website reveals their current rates are well below the FCA ceiling.

FCA takes a strong stance

The FCA actually assumed control of the regulations governing the short term loan marketplace in April 2014. As well as introducing the cap on loan amounts, they have also introduced another new rule regarding the number of times that a loan can be rolled-over. By allowing roll-overs, unscrupulous loan companies can keep extending the repayment date, which may on the surface seem helpful to borrowers, but in actual fact means that they pull in high interest rates over a longer period of time.

In addition to the cap on loan amounts, the FCA has also now put a cap on the size of repayments and has limited the amount of advertising that’s permitted. The fact that complaints have dropped so drastically in terms of volume, tends to indicate that taking a strong stance against irresponsible lending really does work.

Details of the new caps on loans, interest and repayments 

The new cap on repayments means that no one can be asked to pay more than 0.8% per day on the amount of the original loan. In addition, no one has to repay more than twice the amount that they borrowed. These new regulations are not only good for those applying for loans; they’re also good for the industry itself.

 

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Start small for the long term

You have so much to save for or spend your money on that the thought of parting with money that you won’t see again for 40-50 years can leave a little bit of a sour taste. You need to think about the future though. Before you know it you will have spent a decade putting off the inevitable task of starting your pension and ten years of savings will have passed you by in a flash. That’s not designed to depress you but it is something that needs to be considered.

There’s plenty of independent content out there to get started, for example this pension article by thisismoney.co.uk. You can also get some great advice and insights from online tools, for example Nutmeg has an online pension pot calculator that recommends how much you should be saving each month based on your personal goals.

I can’t afford it

No-one is saying that you have to put away hundreds of pounds a month leaving you with no money to enjoy your 20’s. In fact start small – put away what you can afford after you’ve bought that shirt and paid for the night out. Just make sure you start somewhere. Don’t overdo it and sacrifice your entire months earnings letting life pass you by so that you can be rich when you retire. Try and find a balance.

I have no idea what I am doing

This is the case for many people – it can be a daunting task. There are state pensions, workplace pensions, personal pensions then within this there are other types of pensions. What will inflation do in 40 years’ time and how much will I get back? Will that be enough? These are questions that are probably spinning around your head but by using calculators that are specially designed for this task you will be able to get the right advice for your circumstances. There is nothing to say you can’t change and adapt your pension as your circumstances change.

Do I already have a pension?

If you are in your mid – late twenties and have been working for a few years the chances are you may have a workplace pension from a previous job that you are unsure of. We don’t always study our payslips in detail especially now with online banking. Many people tend to check their bank balance and not often check their payslip. You could have been regularly contributing to a pension scheme in your employment – in fact you may be now. If that is the case you can check this out and it is possible to transfer multiple pensions into one new pension.

Get sound advice

It pays to get advice – you may not have time to visit a financial advisor and you may not have the funds to choose this so opting for online content and tools you be able to find out all this information when it is convenient for you. It is important to get it right though as it is a big financial decision as with any savings, borrowings and investments.

New Book Looks at New Ways Americans are Achieving Financial Freedom

Depending on which analyst or talking head you listen to, the “American Dream” is doomed, or at least highly endangered.

According to Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom however, there are still a lot of things that ordinary consumers can do to build their own fortunes, especially in this day and age where traditional rules of success have been thrown out the window. Below are a number of “new rules” taken from the book. Enjoy

One of the first is also the most interesting. It’s the ability to stay mobile and move wherever economic opportunity exists. Amazingly, while Americans have always been adept at moving to wherever they needed in order to find work and prosper, labor mobility in the United States has dropped to its lowest rate since the 1940s. That’s a problem because there are still a lot of areas of the country where economic opportunity exists. Indeed, there are quite a few companies in the United States that are having problems finding enough workers, meaning that the opportunity is there but the workers aren’t.

Surprisingly, one of the core American dreams, homeownership, is actually a detriment for young families because it can anchor them in place and keep them from being able to take advantage of opportunities in other areas of the country. Since the housing bust of a number of years back, home values are only rising modestly and buyers in many areas of the country are scarce. What that means is that, if an opportunity arises, it’s quite easy for a homeowner to lose money if they have to sell their home in a hurry. Also, most larger companies in the United States aren’t offering the generous relocation packages that they once used offer. What that means is that, if possible, staying mobile is your best bet. If that means renting rather than buying, so be it.

Knowing what skills will be valuable in the future is also a very big plus. With globalization and the digital revolution putting the hurt on many industries, and robots taking over human jobs, looking at your skill set and determining whether it needs to be updated is a must. If it’s possible to blend two disparate skill sets, that’s an excellent way to guard against suddenly becoming outdated. Let’s face it, if you used to be a travel agent, a clerk at Blockbuster Video, or even a print journalist, and you didn’t have any type of fallback skills, you know exactly what we’re talking about. Adding to your skill set is a must in the 21st century.

Next is simply this; work more, save more and spend less. It’s no surprise that most Americans are up to their eyeballs in debt, especially with the constant barrage of television, Internet and radio commercials telling us that we need more, more and more. The fact is, one of the biggest contributors to the financial meltdown of 2008 was excessive borrowing and use of credit and, even though it fell after that, it’s on its way back up yet again.

Many economists will tell you that the economy needs consumers to spend but the fact is that saving your money is not unpatriotic.

And there you have it, three excellent ways to achieve financial freedom that you might not have thought about previously. Being able to move when necessary to find gainful employment, have extra skills that you can fall back on just in case, and saving your money rather than spending it needlessly will all help you to become financially free, or at least help you on your way.

 

A calculated gamble that could make your money work for you

If you feel like you spend your life making economies and trying to live on less, there comes a point when you decide you want the money you do have to start working harder for you. The big question is how to do this.

Many money-making ideas usually require having a lot of spare cash to invest in something like a buy to let property or a business. But what if you’ve only managed to put a little bit aside each month in a saving account? What difference can you make with that? With interest rates as low as they are at the moment, your savings certainly aren’t going to multiply when sitting in the bank.

What you need to do is find a way of getting a better return on the money. One way that offers that possibility is through trying your hand at trading online. If you have never traded before, you may think it is too risky as you do not know what you’re doing, and you may lose those hard-earned savings when you’re ‘having a go’. Of course, this is a sensible thought-process.

But there is a way to see what kind of talent you have for trading without any real risk. And that’s through a provider like Tradefair. You can learn spread betting with Tradefair without using real money as an account is available in simulation mode. This is where you make decisions about the different trades you want to place, but the trades are virtual – in other words you’re playing at trading or spread betting. When you get it wrong, it doesn’t matter, as it’s not real money that you’re moving around. The only downside is that when you get it right, you also won’t reap any actual rewards. However you will gain experience, and that counts for a lot in the trading world.

Spread betting can cover many different markets. The biggest trading market in the world is the foreign exchange market. You can spread bet on this in just the same way that you might choose to do so on the number of bookings, number of goals or corners in a game of football. Anyone who has been following the news stories about Greece will know that the financial problems of the country have had an adverse effect on the Euro in recent months. If you’d been able to spread bet, you might have been able to make a profit. Whatever market you’re spread betting in, it’s never possible to know all the future outcomes. But you can identify probabilities and trends and make your decisions from there.

Once you’ve tried out different trades and decisions in simulation mode and started to make some good calls, you can opt to start placing real trades whenever you feel confident to do so. Of course, you’re never guaranteed a positive outcome – you may lose money. That’s why you should invest in tiny amounts at first, testing the water and seeing which way your luck goes. But, if you do get the hang of spread betting, you could soon see a small investment multiply and soar in value.

If you happen to do really well in your first few money trades, don’t let yourself get carried away by your initial success and start to place greater value trades too quickly. It’s tempting to want to see your profits climb quickly, but you’re better off remembering the tale of the hare and the tortoise. Slow and steady progress is the key to greater investment happiness, rather than having a rush of good luck and then crashing and burning.

You may also start off your spread betting experiment but then decide that a particular market doesn’t suit you. If that’s the case, you can always try another market – Tradefair has more than 3,000 markets that its users can trade in from a single account. For example, if you don’t get on well with the foreign exchange market, you could try the commodities market instead and see if you’re any better at speculating on the future values of products such as gold, cocoa and sugar.

Money Market Account or Savings Account?

Although you won’t find them at as many banks as you will savings accounts, money market accounts are definitely an option at many of them. If you glance at both briefly, there are some similarities, including that both pay interest and offer liquidity, as well as both being protected by the FDIC, and similar check writing rules.

On the other hand, money market accounts almost always pay a higher interest rate, making them a more attractive option for most savers.

The simple truth is that, when it comes to what they can do with funds that are being saved in a savings account, most financial institutions are extremely limited. That’s one of the reasons that their interest rates on savings accounts are so low. On the other hand, money market accounts offer them a good bit more flexibility, including being able to invest that money into certificates of deposits (CDs), and other safe investments like government bonds. Because of this, most banks are able to offer interest rates on their money market accounts that are higher than savings accounts, so that they can attract savers to put their money in the former rather than the latter.

Although the differences between the two are not extremely significant, one major difference between a savings account and a money market account is that there are restrictions on how often withdrawals can be made. For example, some financial institutions will have a one-week waiting period for taking money out of your money market account, so if you take money out of your savings account regularly when you need it, a money market account might not be a good idea. On the other hand, if you want to make more money in interest and can let your money sit for a longer period of time, a money market account will definitely earn more money for you.

Now, to be sure, neither a savings account or a money market account offers a great interest rate. For example, a savings account probably will offer somewhere around .5% while money market, even though it doubles that, will usually only offer around 1% in interest. That’s not very much and, if you have a significant amount of money, and you won’t need to access it for a long period of time, there are other investment options that will definitely give you better interest rates.

Also, be sure that you don’t confuse a money market deposit accounts with money market funds, especially because money market funds are covered by the FDIC and are quite different from traditional demand deposit accounts.

How Building Wealth Changes your Life

We’ve talked about it many times here on our blogs, that saving money is extremely important for many things, including giving you financial freedom. What most people who take our advice find is that, once they actually start putting aside a large chunk of change, and building up their wealth, many new opportunities come into their life, and their outlook changes quite drastically

Interestingly, spending money on everything in sight loses its appeal. It’s not that you won’t want to buy anything, but just that accumulating wealth will actually give you the same satisfaction that purchasing things used to give. The fact is, if you measure your wealth by how large your portfolio is, and how much income your assets are generating, it means that you’re much closer to being able to not work anymore, or at least work only when you want to. For many, that reality is much more attractive than, say, the latest piece of tech or a new set of golf clubs.

Having a large amount of money in savings, an IRA, 401(k) or invested in a well diversified portfolio will also give you a taste of financial freedom before you actually become completely free financially. For example, if you have enough savings and investments, you can weather many different kinds of storms, including being able to start a new career if the one you currently have makes you want to jump in front of a bus.   Relatively small expenses like having to replace your car or get a new roof on your home won’t be nearly as stressful either.

Being able to invest more money with a financial firm will also make it less costly to grow your assets. For example, if you invest at least the minimum in a specific share class, Vanguard will offer you funds with smaller expense ratios. As your assets continue to expand you’ll find that many financial firms will offer tax preparation software and financial plans at no cost, as well as cheaper trades. Even better, if you work with a financial advisor who gets paid a percentage of assets under their management, there’s a good chance that they’ll offer you lower fees.

Lastly, when you get to the point where retirement is looming and you’re wondering whether or not you should continue working for an extra year or two, you’ll have the financial ability to make that decision with a lot less stress because you’ll know that, even if you walk away from that steady paycheck, you’ll still be able to support yourself and your lifestyle. If you do decide to work longer, the chances are much better that you‘ll be happy at work because you will have made the decision to keep working, not your bank account.

Saving Small Now Can Add Up to Big Money Later

If you’re a young consumer (and even if you’re not so young) you probably think to yourself all the time that you should be saving more money. The problem is that, on today’s starting salaries, it’s tough to put aside extra money. Add to that the fact that, as a young adults, there are a lot of temptations out there, and putting aside money might seem impossible.

The fact is however that, even if you can only save $100 a month, it’s definitely worth it.

The reason is simple; compound interest. Even a small amount of money, put aside for 20, 30, 40 years or more, can turn into quite a bit down the road. Here’s a great example; let’s say that, at 25 years old, you start saving $100.00 a month for 10 years. If you let that money sit and grow until you turn 65 years old, and have an annual return of 8%, you’ll have $174,920 waiting for you.

Wait 10 years more however, and do the same thing for 30 years, and when you hit 65 you’ll only have $135,940 in your bank account. What that means is that you’ll have contributed three times as much but will end up with $39,000 less than if you had started 10 years earlier.

That’s the power of compound interest.

In simple terms, even a small amount of money put away for a long time can add up to quite a bit and, if you put away a small amount on a regular basis and let it sit for a long time, you could end up with quite a nest egg by the time retirement comes.

And let’s face it, how many of us can’t put away $100 a month? If you consider all of the things you waste money on, like expensive coffees, going out to eat, buying more pairs of shoes then you need, getting an expensive sports car or wasting money on bad habits like smoking or drinking, you probably waste much more every month than $100

That’s not to say that you shouldn’t have fun, not enjoy yourself and not do things that are pleasurable when you’re young. Hey, most of us old folks would love to go back to our 20s and 30s and shake things up again. At the same time however, most of us would also have the hindsight to take that $100.00 a month (or even more if possible) and put into an IRA, 401(k) or other investments where it could sit and grow (and grow, and grow).

So yes, you definitely should be saving and, if you’re in your 20s or 30s, now is definitely the time to do it. Catching up later will make it a lot more difficult and won’t let compound interest turn your small amount of money into a big amount of money. So get started today. Seriously, for $25 a week, you’d be crazy not to.

Professionals Will Keep You in Control

There are times when the unexpected happens. The recession sparked off by Wall Street was certainly one such time and it caused widespread financial misery some of which still exists. While the recession has faded in many places it cannot be completely forgotten. Businesses that have a significant export business may still find their traditional markets are slow; there is so much economic interdependency these days. While consumers have become more confident there is still danger lurking. One of the obvious issues in today’s world is the need for self restraint. The price of oil has fallen and that should reduce prices all round; those that businesses as well as consumers face. If consumers have more disposable income and there is an environment of cheap money because of low interest rates it is easy to get into financial trouble. It is as though the lessons of the recession have not been learnt.

How Are You Doing?

If you take a moment to think about your own personal situation you will be able to identify whether you are in control of your finances. There are many people who aren’t and face regular calls from debt collectors looking for settlement for their clients. The calls will stop if you write to request that; it does not mean the debt will go away unfortunately.

Credit Score

It is likely that your credit score will be suffering almost by the day. Even when a debt is settled a record of arrears can remain there for years. It is important to get a commitment in writing from your creditors that they will remove any reference once the debt is settled. You can check that this is the case when the money is repaid. Without your creditor’s agreement beforehand it is unlikely the creditor will do it voluntarily and there is no legal obligation to do so.

Ideally you should look to work with your original creditor rather than a debt collection agency who will be receiving commission or a percentage of the debt. The original creditor is likely to be far more amenable to a settlement offer.

 

Debt Rising

It seems that the level of debt in the community is rising once again. The difficult years of the recession are so recent yet cheap money and temptation are both pushing people into situations where their finances are likely to get out of control. There are often valid reasons to borrow; cheap money allows real estate investment for example but easy credit also takes consumers into the convenient world of credit cards. Convenience is the plus; the minus is the crippling rate of interest charged on balances that are outstanding at the month end. In no time at all it is possible to build up a core debt that simply will not go away because the minimum monthly payment barely touches the outstanding figure.

Objective

It is not a sign of weakness to seek help. If you write down your current income in one column and your monthly commitments in another you will have a general picture of where you stand. You then need to seek professional advice for an appraisal of your position. It will be objective and may involve your facing some questions you would rather not be asked. This will only work if you are prepared to be completely open about your situation.

You may never have had a financial plan before or if you have it has gone wrong. That is the nature of something that is not an exact science. In an ideal world your plan should cover the short to long term. That means handling your monthly commitments as well s providing for retirement no matter how many years away it might be. It should include a strategy to get rid of serious debt on which high interest is being paid. That may be done with a consolidation loan. The point is that professional help is likely to be the best way to solve a problem and prepare for a better future.

Mortgage Loans – 5 Tips to Future Proof Your Loan

Nothing is certain in the world of finance, but there are definitely ways we can protect ourselves and plan for the future. If you’re in the market for a mortgage, we have some handy hints for making sure your arrangement is as stable and beneficial as possible.

1. Assess your current bank and home loan

Even if you are not considering changing your home loan, it makes sense to do an annual ‘health check’ on your mortgage to make sure you’re on the right track. It may not seem like much, but small fees and differences to rates in mortgage loans can add up over time.

Here are some questions you can ask yourself to future proof your loan:
• What products are available on the market right now? Are there any that suit my needs better?
• How much am I paying each month for my home loan? Is it possible to get a better rate?
• Is a fixed or variable rate best?
• Is my home loan flexible? Can I make extra repayments at no additional cost?
• How much would it cost if I wanted to redraw?
• Am I satisfied with the level of service I am receiving from my bank?

Compare your current home loan to see if it’s competitive with other products on the market. If you find that there are areas that you can save on, refinancing might be a cost-effective way to put you ahead financially.

2. Refinance your home loan to suit your needs

You may have just had a little one, or perhaps you are planning a major holiday overseas. Financial needs change over time, and it pays to make sure your home loan can meet them.

• Get a better rate
The most common reason for home owners to refinance is to secure a lower interest rate. Not only can it cut down on monthly repayments, but over time it can save you thousands of dollars that you can be spending on something else.

• Additional Home Loan Features
The adage ‘more is better’ only applies in some cases when it comes to home loans. If you’re not taking advantage of a lot of the features that your home loan offers, it may be cheaper to choose to refinance to a more basic loan.

That’s not to say that more isn’t better. If you feel that your loan isn’t offering you all that you need, you may benefit from refinancing to a loan with more features. For example, BOQ’s Clear Path offers variable home loans with no application fees, 100% mortgage offset, allows free redraws, and provides flexible repayment options.

3. Simple management techniques

There are ways you can better manage your mortgage to pay it off sooner.

• Repayment Schedule
Paying fortnightly might mean you can shave time off repaying your home loan principal and save on interest, but it may also add to your financial burden. Compare fortnightly repayments with monthly ones and see which one is more beneficial to your situation.

• Extra and Lump Sum Repayments
Sometimes we have a little extra cash in our pocket, and having the option to make extra repayments with no added cost can help you pay off your mortgage faster.

• Direct Loan Repayments
Late payments can incur fees and costs. Avoid these by setting up direct payments with your bank account to ensure you make your minimum repayment by the due date each time.

4. Guard against unexpected financial shortfalls

Sometimes life throws curveballs at us. There are ways you can help to protect yourself against these unexpected financial shortfalls.

• Repayment Holiday
If you need to free up some funds for a short period, a repayment holiday can give you a small break from your loan repayments.

• Redraw Facility
Excess payments made to your home loan is often accessible to you if you need to fund things like home renovations or other large purchases.

5. Prepare for the known and the unknown

Future proofing your mortgage loan means looking ahead. Have a think about what you may need in the close and distant future. For example, are you thinking of renovating in the next five years?

Write them down in a list which will help you visualise any potential problems you may encounter. While we can’t predict all the changes in certain terms, choosing the right mortgage now may mean saving on potential costs of refinancing later.

If you’re ready to make the switch, contact a local bank such as BOQ for expert help on refinancing options.

Investing Doesn’t Take Genius Intelligence, Just Common Sense

A quote that’s attributed to Albert Einstein goes something like this; “Insanity is doing the same thing over and over and expecting different results.” Going by what Mr. Einstein says, it would be easy to assume that most investors are insane because of the fact that they’re constantly trying to predict when to enter and exit specific markets, pick outperforming stocks and are always on the lookout for the next “hot” fund manager to come along.

These are the same investors that rely on top mutual fund recommendations, listen to the advice of a broker who says that they have the skills to ‘beat the market’ and over-weigh their portfolio with asset classes that don’t make sense, including gold. They also rely much too heavily on financial media for information and tips on things like market direction, interest rates and stocks.

Many of these same people are also overly obsessed with every single thing that anyone has to say about investing guru Warren Buffett. The fact is, Mr. Buffett really doesn’t have any special insight into the market but simply happens to be an astute investor who studies prolifically, makes investments for the long-term and places very little focus on current market events.

In fact, a quote from Buffett really underlines his opinion about listening to pundits and trying to follow current market trends; “Forming macro opinions or listening to the macro or market predictions of others is a waste of time.” In other words, Warren Buffett is telling investors to ignore pundits and market trends, something the financial media emphasizes with abandon. In fact, much of the information you’ll find coming out of the mouths of financial media analysts comes from the comments of pundits about everything from market correction to the “best stocks to buy right now”.

Another quote by Mr. Buffett is definitely much more valuable for the everyday investor, and goes like this; “The know nothing investor who both diversifies and keeps his cost minimal is virtually certain to get satisfactory results.”

If you’re looking for investing advice the simple truth is that trying to “play” the markets, sniffing around for “stock tips” and listening to the excess of media outlets and their talking heads is probably the worst way to do it.

If someone “in the know” deigns to give you advice about how to pick stocks and tells you to do it the “same way Warren Buffett does it”, all you need to do is tell them that you are as you buy your stocks and bond index funds with low management fees and hold onto them for the long term.

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