MyLoan Personal Loans News

Wed, 2 May 2007
Interest rates on hold: reprieve for homeowners
In a boon for the nation's mortgage belt, the Reserve Bank decided at its quarterly meeting on May 1 to leave the official cash rate unchanged at 6.25 per cent. The Reserve Bank's decision followed the publication of a much lower than expected March-quarter consumer price index, which showed inflation rose just 0.1 per cent for the quarter and 2.4 per cent for the year. This was well within the Reserve Bank’s target of 2-3 per cent. In a rare show of consensus, many economic forecasters are now predicting a further easing in inflation and most believe interest rates will stay on hold for the rest of 2007, particularly given the impending federal elections.

Mon, 24 September 2007
Recession looms as consumers pay off credit card debts, academic warns
AUSTRALIAN households have shouldered so much debt in recent years that consumer spending levels are expected to fall, which means tough trading conditions for small business this year. One prominent academic thinks it will cause a recession. Only last week we learnt that our national credit card bill tallied up to $37.3 billion, and that's a record. In the past two years it has risen by $4 billion and then $5 billion. Associate Professor Steve Keen, from the School of Economics & Finance at the University of Western Sydney, says this spending spree can't last. Economists see the past 15 years of economic growth as the longest boom in Australian economic history. Keen sees it differently. "It has been the longest debt-driven, speculative bubble in Australian economic history," he argues. "Back in 1975, private debt - the sum of business loans, mortgages and personal loans - was equivalent to 20 per cent of GDP. It's now 147 per cent of GDP - more than seven times as big." Source: The Australian

Mon, 15 October 2007
Debt trap in cash from credit cards
THE excessive rate of interest charged on a cash advance on a credit card should be a disincentive for anyone needing extra money quickly. But new data showing a sharp increase in people increasing their credit card debt to take out a cash advance demonstrates people are either comfortable paying more for the convenience or they don't have a choice. It is generally cheaper to get a personal loan than take a cash advance on a credit card -- where the interest rate range is anywhere between 8.88 per cent and 20.24 per cent. According to recent Reserve Bank data, the average credit card balance rose to a record high of $2811 in August, an 8.6 per cent increase on the same time last year and the largest increase in almost three years. The number of cash advances rose by 9 per cent in the 12 months to August, with the value of advances up 16.2 per cent -- the largest increase in five years. Some analysts say the figures are high because people are paying out one card and changing to a cheaper one. But the fact that the number, value and average cash advance are all rising suggests a different story. Source: The Australian.

Mon, 15 October 2007
Four out of five Aussies fear debt trap
Four out of five Australians in debt are worried they will be further in the red over the coming year, a survey from the nation's biggest consumer credit check firm shows. Almost two million consumers don't know how they will pay off their next bill as personal bankruptcy levels climb and speculation heightens of another interest rate rise by Christmas. The report commissioned by Veda Advantage found 81 per cent of Australians in debt were worried about their ability to make repayments during the next 12 months. Veda's head of external affairs Chris Gration said that while the majority of Australians were managing there finances, about 15 per cent of people surveyed - equating to just under two million consumers nationwide - had trouble coping with the bills. Source: The Age.

Mon, 15 October 2007
Coalition tax shakeup
The Coalition has announced a tax reform plan to raise the tax free threshold and cut top tax rates over five years. Standing alongside Prime Minister John Howard, Treasurer Peter Costello said the effective tax free threshold would rise from its current level of $11,000 to $16,000 within three years. The Government also set a goal of raising the threshold to $20,000 within five years. Mr Howard said tax relief was a superior way of helping families than Labor's cost of living relief. 'By the year 2010, 65 per cent of women with children in the part time work force will face a top marginal tax rate of no more than 15 per cent,' he said. 'Given that a very typical family employment formation...is a husband in the full-time workforce and a mother working part time, this is a highly significant figure.' In 2009/2010, the top rate of tax would be reduced to 43 cents in the dollar, while the second top rate would drop to 38 cents in the dollar. Source: Sky News

Mon, 15 October 2007
Retail giants 'trapping' consumers with credit
MAJOR retailers are being accused of entrapping society's most vulnerable consumers with sophisticated homeware promotions that bind them to high-interest credit cards. Enticed by extended interest-free periods or buy-now-pay-later schemes, millions of Australians have signed up for the cards, often branded with the names of their favourite retailers but operated by global finance companies. The store-linked cards carry top-end interest rates of between 18.99 and 22.9 per cent. Random sampling of current store promotions by The Sunday Age found consumers with good credit ratings being offered less credit while those with multiple debts were given extended credit. Source: The Age

Mon, 12 November 2007
Alarm as defaults on debt rocket
RISING interest rates and a collapse in income are taking their toll in the suburbs and bush, with credit defaults in regional NSW climbing nearly 60 per cent in the past financial year. The spike was revealed yesterday in a study by Veda Advantage, which showed a 35.5 per cent rise in defaults across credit card debt, personal loans and mortgages. NSW mortgage belt suburbs - mainly in the central coast and western Sydney - are struggling, with credit defaults surging 43.5 per cent, ahead of the state average rise in defaults of 40.2 per cent. Describing the findings as disturbing, Veda Advantage general manager of information services Erica Hughes said the survey showed an alarming trend towards credit difficulties and a growing debt divide throughout the regions. Source: The Australian

Mon, 07 January 2008
The Ugly Side of Microlending
How big Mexican banks profit as many poor borrowers get trapped in a maze of debt. In a gleaming office tower in Mexico City secured with retinal scanners, bulletproof glass, and armed guards, dozens of workers in white lab coats dart around a large operations center monitoring long rows of computers. Along one wall, 54 enormous screens flicker dizzyingly with numbers, graphs, and fever charts: a relentless stream of data. You'd think the urgent mission involved tracking the trajectory of a spacecraft or the workings of a national power grid, not tiny amounts of cash and credit for Mexico's working poor. The transactions are so minuscule they hardly seem worth the bother. The average loan amounts to $257. But for Banco Azteca, a swiftly growing bank affiliated with Latin America's largest household retailer, the small sums represent a torrent of revenue that has caught even its founders by surprise. For three decades, micro-lending was seen as a tool of nonprofit economic development. Now poor people are turning into one of the world's least likely sources of untapped profit, primarily because they will pay interest rates most Americans would consider outrageous, if not usurious. With no legal limits on interest levels and little government oversight, for-profit banks in Mexico impose annual interest rates on poor borrowers that typically range from 50% to 120%. That compares with a worldwide average of 31% among nonprofit micro-lending institutions, and the 22% to 29% that Americans with bad credit histories incur on credit-card debt. Azteca's business model succeeds not only because it can charge credit-starved clients almost whatever it wants. Equally important is that low-income Mexicans anxious about maintaining their reputation tend to pay back what they owe, regardless of the hardship. Those who slip behind receive frequent visits from motorcycle-riding collection agents. Default rates are infinitesimal. "We lend to them as much as they can borrow," says Azteca Vice-Chairman Luis Niño de Rivera, "and they can borrow as much as they can pay."

Mon, 07 January 2008
Wong backs away from irrigator loans
CLIMATE Change Minister Penny Wong has refused to commit to providing low-interest loans to desperate irrigators in South Australia's Riverland. But in a visit to Renmark to meet irrigator groups and local government leaders, she said the federal Government would consider all options put to it. The South Australian senator's appearance in the Riverland, where fruit and winegrowers face water shortages, has buoyed the community. South Australian Murray Irrigators director Tim Whetstone said: "It's a breath of fresh air within the community and for the irrigators. We've had so little representation up here to look at our needs and the pressure that we're facing. "The last government announced a water plan and then did nothing about it. They put it on the mantelpiece, and that's where it stayed." Senator Wong told those she met yesterday her task was to find long-term solutions for the Murray-Darling Basin. She said her visit five days after the Bali greenhouse conference showed the priority she gave to hearing from the people who were directly affected. "I wanted to not just speak to the scientists and experts, but hear from the people," she said. The low-interest loan scheme for irrigators to buy water from upstream farmers was championed by South Australian Premier Mike Rann. He told the Howard government it needed to free up $250million immediately for the scheme. Source: The Australian

Mon, 07 January 2008
No consensus on loan scheme
PARTICIPANTS in a roundtable discussion on the spread of FEE-HELP have agreed to disagree on whether the student loan scheme had a place in the sector. At the roundtable, held at the Australian National University yesterday, academics argued whether the scheme gave an unfair advantage to private, for-profit providers. The previous federal government introduced FEE-HELP in 2005 as a form of income-contingent loans for domestic students in fee-paying undergraduate programs. The move opened the market to more private providers who could then have access to commonwealth-supported places. Providers can have as many FEE-HELP places as they like, but public universities are restricted in the number of HECS places they can offer. After yesterday's discussion, University of Melbourne policy analyst Andrew Norton said dryly: “I don't think consensus was reached.” University of Queensland economist John Quiggin (in the collegiate spirit, sharing Mr Norton's mobile phone to speak to The Australian) said there was agreement on one issue: that there should not be a sharp divide between public and private. Source: The Australian

Mon, 21 January 2008
Citi to Announce Big Cuts and New Investors
Citigroup is expected to announce a series of drastic steps on Tuesday, including the elimination at least 4,000 additional jobs, a steep cut in its stock dividend and another big investment by foreign investors, in a bid to bolster its finances in the face of deepening losses. Beginning what is expected to be a grim week for financial company earnings, Citigroup is likely to announce a write-down of $18 billion to $20 billion, the biggest yet by a major bank or Wall Street firm, said a person briefed on the situation. Such a big loss, the result of soured mortgage-related investments, could wipe out the bank’s profit for all of 2007 and plunge it into the red. As part of a plan to shore up Citigroup, the chief executive, Vikram S. Pandit, is expected to announce the start of a new round of job cuts that many analysts say will accelerate in the coming months. The first reductions, of about 4,000 workers, will come on top of 17,000 job cuts announced last spring. Citigroup is also expected to turn to wealthy foreign governments again and announce the sale of a $12.5 billion stake to the Kuwait Investment Authority and several others, including Prince Walid bin Talal of Saudi Arabia, people briefed on the situation said. In November, the company sold a $7.5 billion stake to a Middle Eastern fund, the Abu Dhabi Investment Authority. The latest moves highlight the extent to which Citigroup’s capital position has weakened and raise questions about the company’s diversified business model. “The board has been behind the ball, no doubt about it,” said Meredith A. Whitney, a banking analyst at CIBC World Markets, who has called on Citigroup to cut its dividend. “This is a company with serious capital shortfalls. The balance sheet should be the first thing that should be looked at for a bank, not the last.” Shares of Citigroup have dropped more than 47 percent over the last year. They fell 50 cents on Monday to $29.06 Many investors have expected Citigroup to cut its dividend but the company’s board has resisted that step. Eliminating the dividend completely would save Citigroup about $10 billion a year. The details about additional layoffs, meanwhile, are uncertain. Mr. Pandit has been working on what he called an “objective, dispassionate review” that might lead to a reorganization or other adjustments. For Citigroup, things may yet get worse. The company announced in December that it would bring tens of billions of dollars worth of securities held by structured investment vehicles onto its balance sheet. And as rising unemployment adds to the gloomy talk about a recession, Citigroup may face more losses on home equity loans, credit card debt and personal loans. Source: The New York Times

Mon, 21 January 2008
WORLD BUSINESS BRIEFING; Switzerland: Massachusetts Challenges U.S. Unit of Ubs
UBS Securities, the investment-banking division of the Swiss-based UBS, was accused by Massachusetts regulators of dishonest and unethical practices in dealings with hedge-fund advisers. The subsidiary, based in Stamford, Conn., gave hedge-fund managers below-market rent, low-interest personal loans and other benefits to retain and increase business, according to a complaint from the office of William Galvin, the secretary of the commonwealth and its top securities regulator. The complaint also accuses UBS of failing to supervise gifts and gratuities. The action, filed with the state's Securities Division, seeks a cease-and-desist order, a censure and an undisclosed administrative fine, the statement said. Doug Morris, a UBS spokesman in New York, declined to comment. Source: The New York Times

Mon, 10 March 2008
Challenges ahead, but economy can cope
I EXPECT to see continued fallout from the sub-prime crisis in the US, with the problems spreading from the realm of finance to affect most sectors of the global economy. Unfortunately, this crisis has caused the price of money to rise and consumers will eventually pay more to borrow. Interest rates are already creeping higher on business loans and it is inevitable this will flow through to home loans and other forms of finance. These developments may well negate the need for the Reserve Bank of Australia to lift official interest rates further in 2008. I believe we are near the top of the interest rate cycle, as we are seeing central banks in the US and other countries dropping official rates in an effort to avoid recession. Meanwhile, real estate prices have stabilised in most areas, while property prices close to the CBDs across Australia continue to rise. This growth, coupled with the prospect of higher interest rates, will make housing affordability one of the biggest challenges this year for young Australians. The supply of new rental properties continues to be at an all-time low, leading to an acceleration in rents, creating further pressure on those who are keen to get into the property market for the first time. Most young people are now effectively priced out of property ownership in many areas of Australia and face higher rental payments, while the housing construction sector continues to suffer from low demand. The problems surrounding home loan affordability recently led me to submit an innovative tax concession plan to the federal Government and Opposition to address the growing crisis, which is not only creating financial problems but also social and family pressures. The Rudd Government is aware of the problem and has promised tax concessions for first home buyers, but it will need to do more to address this issue, as it points to a wider gulf in the community between the haves and the have-nots. Source: The Australian

Mon, 10 March 2008
Debt Freedom Day getting later
CRACK open the bubbly: today is debt freedom day! But don't too excited: this is just the hypothetical point in the year when workers have earned enough to merely service their debts - and it has fallen more than a month later than last year. The average Briton spends the first 70 days of the year working just to clear interest on credit card and loan debt, according to Unbiased.co.uk's annual survey. That is 39 days later than last year, when debt freedom day fell on February 1. Personal debt levels have increased by over 10 percent in the past year, and average levels of interest payable on this debt have increased by over 6 percent. Personal loan debt is almost four times higher - rising to £9.8 billion from £2.6 billion pounds - while interest rates on personal loans are 0.5 percent higher as the credit crunch takes its toll. That means that Britons pay almost £1.5 billion in interest payments alone. Credit card debt, meanwhile, has declined slightly, to £54.9 billion from £55.6 billion. David Elms, chief executive of Unbiased.co.uk, which promotes independent financial advice, said: "This year's 'debt freedom day' is a real warning for UK consumers. "Compared to last year we have spent almost two months longer this year to pay off the interest on our borrowings and this doesn't even take into account mortgage costs. Source: The Australian

Mon, 28 April 2008
Debt trap in cash from credit cards
THE excessive rate of interest charged on a cash advance on a credit card should be a disincentive for anyone needing extra money quickly. But new data showing a sharp increase in people increasing their credit card debt to take out a cash advance demonstrates people are either comfortable paying more for the convenience or they don't have a choice. It is generally cheaper to get a personal loan than take a cash advance on a credit card -- where the interest rate range is anywhere between 8.88 per cent and 20.24 per cent. According to recent Reserve Bank data, the average credit card balance rose to a record high of $2811 in August, an 8.6 per cent increase on the same time last year and the largest increase in almost three years. The number of cash advances rose by 9 per cent in the 12 months to August, with the value of advances up 16.2 per cent -- the largest increase in five years. Some analysts say the figures are high because people are paying out one card and changing to a cheaper one. Source: The Australian

Mon, 28 April 2008
Challenges ahead, but economy can cope
I EXPECT to see continued fallout from the sub-prime crisis in the US, with the problems spreading from the realm of finance to affect most sectors of the global economy. Unfortunately, this crisis has caused the price of money to rise and consumers will eventually pay more to borrow. Interest rates are already creeping higher on business loans and it is inevitable this will flow through to home loans and other forms of finance. These developments may well negate the need for the Reserve Bank of Australia to lift official interest rates further in 2008. I believe we are near the top of the interest rate cycle, as we are seeing central banks in the US and other countries dropping official rates in an effort to avoid recession. Meanwhile, real estate prices have stabilised in most areas, while property prices close to the CBDs across Australia continue to rise. This growth, coupled with the prospect of higher interest rates, will make housing affordability one of the biggest challenges this year for young Australians. The supply of new rental properties continues to be at an all-time low, leading to an acceleration in rents, creating further pressure on those who are keen to get into the property market for the first time. Most young people are now effectively priced out of property ownership in many areas of Australia and face higher rental payments, while the housing construction sector continues to suffer from low demand. The problems surrounding home loan affordability recently led me to submit an innovative tax concession plan to the federal Government and Opposition to address the growing crisis, which is not only creating financial problems but also social and family pressures. The Rudd Government is aware of the problem and has promised tax concessions for first home buyers, but it will need to do more to address this issue, as it points to a wider gulf in the community between the haves and the have-nots. Meanwhile, for existing home and apartment owners, I believe there will be a growing trend in 2008 to refinance their loans to offset the higher costs of their mortgages. Borrowers are taking advantage of the red-hot competition among lenders, which is the most aggressive it has been over the past 30 years and will continue next year. However, borrowers should also be aware that there are many loans with interest rates well below those being advertised in the market and available to them through reputable mortgage brokers. More than 30 per cent of the loans being provided through Aussie are refinances of existing mortgages and I expect this proportion to grow in 2008. Near full employment and the tax cuts to come into effect this year will mean consumer debt will continue to spiral. It appears as though more people are becoming used to their debt, being seduced by deferred payment terms on luxury goods such as plasma television sets rather than building up their savings to purchase them. The value of Australia's personal and car loan market is rising steadily to $2.5billion a month, and latest figures from the Consumer Credit Index show personal loan applications have risen by up to 10 per cent over the previous year. Source: The Australian

Mon, 08 September 2008
Credit Union Australia passes on rate cut
CREDIT Union Australia (CUA) will follow the big four banks in passing on the full 25 basis point cut to its standard variable mortgage rate following the Reserve Bank of Australia's (RBA) cut to the official cash rate on Tuesday. Australia's largest credit union says it will lower its standard variable rate for home loans to 9.22 per cent from Monday, and the interest rate on personal loans by 25 basis points. Fixed rate home loans also will be reduced by between 15 and 30 basis points, the second reduction in a month, CUA said. CUA's interest rate on a home loan over a one year term now stands at 8.79 per cent. CUA's move comes two days after St George Bank, Australia's fifth largest lender, pipped the big four banks in the rush to pass on the RBA's first cut to the cash rate in seven years. Source: The Australian

Tue, 07 October 2008
Choosing a personal loan
Taking out a personal loan is the standard way of borrowing money from a bank, building society or specialist loan company. You can usually borrow up to £15,000 for anywhere between six months and 10 years depending on the health of your finances. Loans can be secured or unsecured. A secured loan is one that is tied to your house - which means you might have to sell your home if you can't keep up with repayments. Unsecured loans are not tied into anything, but if you default on your repayments you could end up being credit blacklisted. This could prevent you taking out new credit cards, a mortgage or even taking advantage of an interest-free deal in a shop. Making comparisons To get the best deal, shop around. In general, the more you borrow, the lower the interest rate will be, but rates vary from around 7% up to 20%. You don't have to go to a traditional bank or building society, many good deals are offered through supermarkets, so shop around. Be careful when comparing products as lenders calculate the annual percentage rate (APR) in different ways. Loans for specific items such as new cars are also available, often with lower interest rates. When comparing APRs, make sure that you're comparing like with like. Don't pay attention to the monthly interest rates advertised by shops - these are always lower than the annual rate and can mislead you into thinking you've got a better deal than you really have. Repayments If you are refused credit you could check your credit history to make sure no mistakes have been made How lenders decide whether or not to make a loan Loans are repaid in monthly instalments over an agreed period. This amount of time is usually fixed and if you want to pay off the loan earlier you might have to pay a penalty. The longer the repayment period, the more interest you will pay, so go for the shortest one you can manage. Flexible loans, which let you pay back the money whenever you want, are becoming more common but the interest rate charged is often higher. The most important thing is to make sure you know exactly what the monthly payments will be, and how much you will pay back in total. Source: BBC News

Tue, 07 October 2008
Cheap Loans Done For As Crunch Spreads
In a period of global economic turmoil, consumers on the hunt for cheap loans may find finance increasingly difficult to come by, uSwitch has warned. A recent investigation carried out by the group showed that over the course of the past month, the number of personal loans on the market in the UK has shrunk from 56 to 52, while repayment rates have shot up as much as nine per cent. The price comparison site noted that consumers looking for a personal loan from Black Horse will find that they face repayment rates of up to 36.9 per cent on an annual basis for loans of between 1,000 and 2,999 pounds, up nine per cent from one month ago. Meanwhile, many other loan providers have also pushed up rates while the ongoing financial storm continues overhead. Bank of Ireland customers now face annual percentage repayment (APR) rates of 10.7 per cent, an increase of 1.8 per cent from the 8.9 per cent offered on its personal loans last month. So too, newly nationalised lender Bradford & Bingley has also upped APR rates by one per cent, as have Lloyds TSB and Marks & Spencer. Meanwhile, Barclaycard, Asda and Sainsburys have also all enacted hikes of between 0.2 per cent and 0.6 per cent. Commenting on the figures, Louise Bond, personal finance manager at uSwitch, said that they show just how volatile the personal loans market has become. “As the news agenda overflows with the global financial meltdown, a plethora of loan rate increases have been implemented in the past four weeks. Lenders have increased unsecured personal loans by as much as nine per cent APR making borrowing even more costly for consumers. In the summer months we kissed goodbye to sub-seven per cent APR loans when the remaining six providers dropped out of this bracket but the sub-eight per cent offering is still prominent. Overall, the loan market is vast but there are still some good deals out there so consumers should still shop around,” she insisted. The group went on to state that when it comes to looking for the cheapest loans, YourPersonalLoan is offering borrowers rates of 7.6 per cent APR on a 10,000 pound loan with a five-year period of repayment, while AA offers 7.7 per cent APR for a personal loan of the same value and repayment arrangement. Ms Bond, iterating the fluctuations in the current market, explained that while Asda topped the best-buy list a few weeks ago, it has now fallen to joint-fifth place with its 7.9 per cent APR loan. Abbey also offers a loan with the same rate of repayment. Source: 1stopfinanceshopuk.biz

Tue, 07 October 2008
Personal Loan
In between a credit card and a mortgage is a personal loan. We need personal loans for all sorts of reasons. For many starting to feel the effects of the credit crunch the drying up of liquidity in the global financial system means fewer mortgages on offer, credit card applications rejected and personal loan applications scrutinised and vetted more closely than previously. Feeling Rejected? Recent data suggests the conversion from application to acceptance is between 30-40%, meaning banks are cherry-picking the best prospects and rejecting up to 70 per cent of loan applications. In the adverse and secured loans market, finance companies say that, from April 2007 to April 2008, their rejection rate was 21%. These are but two examples of lenders tightening their criteria for lending; and, although few lenders are willing to go into specific detail what they look for on a loan application, that could be the difference between acceptance and rejection. If youre looking for a personal loan, there are a number of things you can you do to shorten the odds in your favour of being accepted. Many believe that the first step in the applications procedure for a personal loan is to look for the lowest rate on the amount you need to borrow, and that's the first mistake the potential borrower makes. Banks rarely make the decision to lend to you based solely on the information you've put on the application form. They also rely on third part sources such as credit reference agencies. How to 'score' a loan The first thing credit reference agencies look for for on the lenders behalf is whether or not the loan applicant is on the electoral roll. Data from CIFAS, the UK's Fraud Prevention Service, shows that fraudulent applications rose by over 20% in 2007 compared to 2006. And worryingly, the numbers of fraudulent applications that succeeded in being granted credit were up by nearly 65% year on year. The first thing a finance company wants to know is that you live at the address you've supplied and the easiest way of checking this is with the electoral roll. The leading credit reference agencies "score" potential borrowers with points allocated for various lending criteria and the more points on the score, the more creditworthy the borrower. The agencies themselves don't approve your application, but the information they provide influences the lender and is a large contributing factor in whether you qualify for a loan or not. There are a number of steps you can take to help improve your credit score. The first - obviously - is getting on the electoral roll. If you have outstanding balances on your credit cards, try to pay more than the minimum each month as this will not only help you build a better credit history, but also reduce the debt quicker and save you interest. Avoid carrying a balance that is more than 30% of your credit limit (on a £5,000 card limit, this means anything over £1,500); creditors may view it as excessive debt and conclude that, if you can't keep up repayments on current debts, you'll struggle taking on more debt. Two final points about your credit rating: * The first is to avoid multiple loan applications as each application - successful or not - leaves a "footprint" on your credit file. Lenders may view a flurry of credit application searches as indication that you're desperate for money, over-extended or even that your identity has been "cloned" and all the applications are fraudulent. * The final word on your credit rating is this: avoid credit repair companies. These are not credit reference agencies and don't have the authority to amend your credit report. Don't be tricked into paying for services you don't need when you can do it directly with a credit reference agency for a nominal fee. It's only when you've sorted this out should you think of filling out an application form. The only criterion for filling in a loan application form in is: be honest. Telling lies on the application form is not a good idea for a number of reasons, not least because it's fraud. You may think being economical with the truth is OK, but the lenders will merely consider you a criminal. For one thing, any "discrepancies" between your declared existing debts and what a reference agency discovers will be dimly viewed and could go on your credit record, making it even harder for you to get credit. It also helps your case if you have what banks call an "existing and ongoing relationship" with the institution and they have evidence to suggest you manage your finances well. If your finances are a mess, you may think you're being clever by avoiding banks you've dealt with in the past - this is good in theory but, in practice, you could come a cropper. Many seemingly independent lenders are owned by the same corporation for example, you could be in arrears with a loan from Nat West, behind on your Mint credit card and apply to RBS for another loan only then to discover RBS owns both. Source: securedfastloan

Mon, 13 October 2008
Can banks give a full 1 per cent? The 'No' case
NO. Banks have a free pass this week from the Government to avoid cutting interest rates on home loans by the same extent as the 1 per cent cut. So what is no surprise is that banks will hold back some of the rate cut - late yesterday there was still no rate cuts announced for those with business overdrafts, credit cards or personal loans. While frustrating for borrowers, in the short term this is the pragmatic approach. Banks worldwide are finding it difficult to raise funding on wholesale markets. The reality is that the credit crisis is now in a second and far more punishing phase. Source: The Australian

Tue, 11 November 2008
Westpac, NAB and ANZ fail to pass on full rate cut
WESTPAC, the National Australia Bank and ANZ will not to pass on all of the Reserve Bank of Australia's 75 basis point interest rate cut to customers. Citing higher funding costs, Westpac announced a reduction in its standard variable mortgage rate of 65 basis points to 7.71 per cent, effective from Monday, November 10. National Australia Bank announced it would cut its variable mortgage interest rates by 62 basis points to 7.74 per cent. ANZ cut its variable home loan interest rate by 58 basis points, taking its rate to 7.74 per cent effective November 14. However, Interest rates for credit cards and personal loans will be reduced by up to 75 basis points, effective on November 14. They followed the lead of the Commonwealth Bank which on Tuesday said it could only pass on a cut of 58 basis points taking its variable home loan rate to 7.74 per cent. The Reserve Bank lowered the official cash rate to 5.25 per cent from 6 per cent, its lowest level in more than five years. The 75 basis point cut surprised the market, which was expecting a more modest reduction of 50 basis points, and marks the third reduction in as many months. Westpac said it would also reduce interest rates on consumer credit cards and business credit cards as much as 0.8 percentage points, from November 14. "Westpac is sensitive to the challenges being faced by many working families,'' Westpac group executive, retail and business banking Peter Hanlon said. "However, we are still having to meet substantially higher funding costs." Source: The Australian

Tue, 11 November 2008
Market crash - what it means for you
...The Reserve Bank shock 1 percentage point interest rate cut was a bid to free up credit and put a bit more cash in consumer’s pockets. But retailers report consumers have stopped spending – and consumer sentiment, a measure of confidence in the economy – is back at 1992 recession levels. The number of housholds in mortgage stress -800,000- is five times higher than last March, according to the latest JP Morgan and Fujitsu survey. In the case of a sharp global downturn or fall in house prices, highly indebted Australians who borrowed heavily to buy a home they assumed would always rise in price will be hit hard. Woodward Nhill Financial Planning's Mr Bilson recommends paying down debt. "You’ve got to get rid of the debt," he says. "Definitely credit card debt should be the first thing to go. Then the personal loan," he says, since they charge high interest and no tax advantage. "While times are uncertain, get rid of your non-deductible debt so if you lose your job or the market turns suddenly, you’re not standing out there wondering how on earth you live." Source: News.com.au

Thu, 18 December 2008
GE rushes to cap its losses in Australia
GIANT US conglomerate GE's Australian retail finance operations are showing that even the best-run companies in the world can hit potholes where their operations involve non-bank housing loans, high interest rate credit cards and defaulting unsecured personal loans. As a wholly owned subsidiary of General Electric of the US, GE Money is classified by regulator ASIC as a "non-disclosing entity" but, according to the documents it has filed, the group's mortgage arm appears headed for a multi-million-dollar loss in calendar 2008. Mortgage arm GE Money Mortgage Holdings reported a net profit of $71.64 million in 2006 and a net loss of $5.71 million in 2007, since when home lending conditions have suffered a sharp turn for the worse. The same entity reportedly paid $408 million for the parent company of Wizard Home Loans to founder Mark Bouris and his equal partner, James Packer's Consolidated Press, at the end of 2005 and later wrote up $133 million to GE Money's goodwill account, a legitimate accounting device which is in effect an immediate asset write-down. A concern is that such write-downs are expected to be "earned back" in future years and it's not clear that has happened. In that case, the relevant company should adjust its prior earnings upwards and, with it, its tax bill. Wizard, whose business model has fallen from grace because cheap money has dried up, is now for sale. National Australia Bank is reportedly interested, but in this battered market the price is expected to be a pale shadow of GE's 2005 purchase price. In October, GE announced it was pulling out of funding "white-label" mortgages sold through intermediaries, small business finance and, critically for motor dealers, car financing. GE was not alone in pulling out of financing dealers but the resulting rush to refinance holding stock or "floor plans" has forced dealers to slash prices to reduce inventory. GE Money began in Australia more than 10 years ago with GE buying what was the Coles Myer group's credit card operations. Acquisitions that followed include Nissan Financial Services in 1998, Avco Financial Services in 1999, AGC Australia and New Zealand in 2002 and the Wizard deal in 2005. The company at the top of the financial tree in Australia, GE Capital Finance Australia, tells a happier story, with net reported cash inflow from operating activities jumping in 2007 from $585 million to $815 million in 2007. Indeed, company sources pointed to recent predictions by the US parent that the entire company is expected to make a net profit of $US20 billion for 2008, with the financial arm contributing some $US9 billion. GE, whose legendary CEO Jack Welch retired in 2001 in favour of current incumbent Jeff Immelt, is looking to reduce its reliance on financing in favour of core businesses such as its engineering operations, which build everything from jet engines to heavy electrical equipment to railway locomotives. The finance arm is, meanwhile, expected to contribute about $US9 billion -- almost half the global profit. But the mortgage operation in Australia, which takes in Wizard, attracted attention when it failed to pass on any of the 1 per cent interest rate cut announced by the Reserve Bank on October 7 to holders of its white-label mortgages sold through third-party mortgage managers and brokers. GE Money, the main lender, did announce it would pass on some or all of the subsequent 75 basis point cut in official interest rates announced in early November, but it is still trailing most major financial institutions. New Wizard clients got the benefit on November 19 but longer-term borrowers had to wait until last Thursday, November 27, for relief. GE Money's other main stream of lending is via credit cards, most of which attract higher rates of interest than is normal. It has also been active in high interest rate unsecured personal loans, which some watchers say were targeted at borrowers with bad credit histories. Source: The Australian

Thu, 18 December 2008
CBA capital raising sideshow
THE Commonwealth Bank's capital raising was a debacle of the bank's own making. But aside from marvelling at the sheer incompetence of it all, the real problem is the dawning reality that Australian bank profits are falling fast. It is galling, to say the least, for CBA to so publicly shoot the messenger in Merrill Lynch, when at issue was the bank's profit and its own obligation to inform the market that bad debt charges were materially higher than previously disclosed. CBA has lagged the market all year on becoming aware that bad debts would rise and that it should lift capital to combat potential losses. All year, and even yesterday, the bank was downplaying the need for it to match other banks' tier-one capital levels. For the record, the bank now has the highest tier-one capital ratio, at 7.5 per cent, just ahead of NAB, which one could take to mean that it, too, realises it has been wrong all year. And what an extraordinarily ham-fisted way to get there. On Tuesday afternoon, when Merrill Lynch rang the market trying to raise $1.7 billion for CBA, it did not pass on word that the bad debt charges had risen. This was not disclosed until the money had been raised. That is a disgrace. ASIC should come down on the banks like a ton of bricks and, arguably, senior executives at the bank should walk or be shown the door. CBA says Merrill was told to tell everyone, but it was the bank's responsibility to do so. The bank now says it will sue Merrill Lynch for failing to fulfil its responsibility, but what does the bank plan to do about its own failures? The latest guidance on bad debts was between 40 and 50 basis points but, not believing the bank, the market consensus was at 53 points and CBA disclosed last night that the real figure was 60 basis points. The new figure, we are told, only came to light late on Tuesday afternoon due to a reassessment of potential personal loans on one line and, on another, the obvious corporate snafus like Centro, Babcock et al. Merrill has lost about $12 million in fees and faces certain legal action from CBA. CBA faces censure and potential penalties from ASIC. ASIC of course should also look at itself, because once again Tuesday's market defied reality, suggesting manipulation. All Tuesday there were rumours of a CBA capital raising, yet miraculously the stock outperformed all the banks, jumping 3.92 per cent to close at $29.15 a share. This made the placement at $27 achievable, but logic would suggest the stock price should have fallen in the face of yet another share issue. Merrill and CBA had been in contact daily for the past two weeks because the broker was selling shares to manage the $750 million hybrid repurchase. This was all in the market and still CBA wasn't alert to its continuous disclosure obligations, while its share price was seemingly being manipulated to manage the price. UBS is the only player to have emerged with distinction. It moved in quickly yesterday morning, picking up about $26 million and Ralph Norris's enduring thanks. Norris was telling anyone who would listen yesterday that UBS boss Matthew Grounds and his comrades walk on water. When the investor base revolted over CBA's lack of disclosure, Grounds was on the phone to Norris and his hapless CFO David Craig at 7.30am yesterday offering to help (for a fee), and the due diligence team walked through CBA's doors at 8am. By 9.15am the papers were signed and Norris had an underwritten deal to raise $1.7 billion. To sell CBA yesterday, even at a lower price of $26 a share, was a commendable performance. This was a debacle but at the end of the day, while CBA stuffed up badly, it at least belatedly realised it needed to raise more capital and has done so. Investors can now look forward to a steady stream of bank profit downgrades, as impairment charges take centre stage for the sector. Corporate collapses have been around for a year or more, but personal debt starts to look shaky when unemployment rises, and that is next year's reality. Source: The Australian

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