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Repaying Your Mortgage or Rent With Your Credit Card? - If So, Then Read This

More than a million UK residents have used their credit cards to cover their mortgage repayments or their rent in the past year, according to a recent survey by the polling organisation YouGov.

This equates to approximately 6% of the 17m residents across the UK who pay either a mortgage or rent, with 7.5% of 18 to 24-year-olds admitting to using their credit cards this way.

The figures suggest that first-time buyers and young homeowners are the most likely to reach for the plastic in a "desperate attempt" to maintain their place on the property ladder.

According to Adam Sampson, chief executive of the housing charity Shelter, which commissioned the poll, the number of UK residents being forced to use "short-term, high cost borrowing" methods to keep up with repayments is "rapidly rising".

Shelter links this problem to the recent global credit crunch, which has pushed up interest rates for many borrowers.

The survey found that men were more likely to use their credit card in this way compared to women, with 7% of males admitting to it compared to 6% of women.

It also found that residents in the Midlands and Wales were more likely to take such measures to keep a roof over their heads, with 9% doing so, compared to just 3% of Scottish residents.

The reason that such practices can be so risky is that credit card interest rates are often much higher than those attached to mortgages.

On average, most credit card companies charge between 15% and 18% annual interest, almost double that the cost of even the most expensive mortgages, with some bad credit applicants paying as much as 40%!

Even more alarming, the study found that most people were withdrawing the rent or mortgage payments from their credit card accounts, as apposed to paying housing associations directly.

Shelter adds that this is a "huge problem" which is likely to continue as long as housing prices keep on rising.

Liam is a UK based financial author currently focusing on secured loans & mortgages and in particular the effects of paying off a mortgage with a credit card.

posted by gcpdt @ 10:20 PM 0 comments

Credit Where Credit's Due - Second Chances To Gain Some Finances

As cynical a saying as it may be, "there's no such thing as a second chance" certainly holds some degree of truth for countless people in certain situations. First impressions are often everything, whether it is at a job interview or on a first date: get it right at the first time of asking or kiss the opportunity goodbye.

But many would also argue that one of the fundamental human rights is the right to make mistakes and learn from them. After all, nobody is perfect. In the past, countless people have found themselves in a financial rut due to a bad credit rating, often gained through a combination of youthful inexperience and bad money-management skills. Indeed, many university graduates face years of bad credit that has been gained entirely through meeting day-to-day living expenses whilst studying; not everybody has parents that can afford to pay for 4 years of full-time higher education.

Furthermore, in recent years, there has been a significant increase in complaints to the Financial Services Authority (FSA) about the misselling of financial services, and in particular unscrupulous brokers who mislead tenants into providing false information on mortgage applications, with the purpose of borrowing more money than they can afford. So, bad credit isn't always down to bad money-management skills; it can be down to bad advice.

Perhaps contrary to popular belief, countless people with well-paid jobs, money in the bank and little or no debt can still have an adverse credit rating. And that blot on their record can be difficult to erase and can have implications for being able to borrow money. But more and more financial organisations are now beginning to realise that an adverse rating shouldn't automatically disqualify the individual from being able to borrow.

Indeed, bad credit loans and other 'bad credit' financial services now exist specifically for people in such a situation and anything from 5,000 to 100,000 can be borrowed. There are also services available that provide advice and outline the bad credit loan options. After all, this is a golden opportunity to improve the credit rating and it's important to borrow the right type of loan to suit the individual. The last thing that is needed here is to get into further financial difficulty.

With so much relying on credit ratings these days, it can be difficult for people to find their feet again financially, and many people still have blots on their credit report years after any debt has been cleared, despite having savings and decent earnings. But the financial industry is coming to realise this and there are now services available for those with an adverse credit rating, giving people that second chance they deserve.

Andrew Regan is an online, freelance author from Scotland. He is a keen rugby player and enjoys travelling.

posted by gcpdt @ 7:57 AM 0 comments