The move came after the National Union of Students (NUJ) called the firm “highly irresponsible” for marketing loans with a typical APR of up to 4,214% to students. Wonga said it will continue to except applications from working students despite taking down its marketing material.

The pages in question suggested a Wonga short-term loan could be a viable alternative to a student loan – on which borrowers pay an interest rate of just 1.5%. The firm said taking out one of its loans could help with the purchase of air tickets or meet any essential outgoings between paydays.

A student borrowing £400 from Wonga for a period of 30 days would typically pay interest and charges of £125.48 for credit, paying back a total of £525.48.

The offending material said: “Student loans are usually far cheaper than your standard personal loan. But there can be a downside – you potentially end up borrowing more than you need, while a nasty debt accumulates for your graduation that could take years to repay.

“With a Wonga loan the interest rate is much higher, but you only borrow it for a month and pay the loan back on a date that suits. For those occasional emergencies or unexpected events, it means you can carry on with life without a long-term debt that keeps accumulating.”

Pete Mercer, NUS vice-president, said: “It is highly irresponsible of any company to suggest to students that high-cost short-term loans be a part of their everyday financial planning.

“Students should think long and hard before choosing payday loans over any other form of borrowing, including Government-backed student loans.

“If students are struggling to make ends meet there is often other support available, and anyone worried about their finances should talk to their students’ union or financial advisers at their university.

“Wonga should immediately withdraw this predatory marketing, which contains information that appears to be inaccurate, and is aimed at financially vulnerable young people.”

A spokesperson for Wonga said: “Our decisions about any students who do choose to apply are based on the same rigorous checks we perform on all applications, but we do not believe working, adult students should be excluded from a popular credit option.

“The two web pages in question are examples of the many search engine optimisation (SEO) pages on our site, which is essentially content covering all aspects of credit designed to help our particular option appear in general internet searches for loans or credit.

“As for the content of those pages, we merely highlight the risk and high cost of unauthorised overdraft charges, plus the potential trap of long-term debt versus a short-term solution.”

The Office of Fair Trading has said payday loan firms like Wonga offer a useful service to people who cannot access traditional forms of credit and should not have the amount of interest they charge capped. The Labour MP Stella Creasy has called on the government to limit the amount payday loan companies can charge their customers.

A YouGov survey carried out on behalf of Shelter found that a total of 7 million people fell back on some form of credit to help meet their housing costs last year as rising living costs and falling incomes put pressure on household budgets.

One in seven of these were forced to take out an expensive payday loan to help keep a roof over their heads. Some payday loan providers charge interest rates with an equivalent APR of over 4,000%.

Payday loans are designed to tide people over until their next payday but can quickly lead to borrowers being sucked into a downward spiral of debt if payments are missed or additional loans taken out to cover payments.

Campbell Robb, Shelter’s chief executive said: “These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.

“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable.  It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness.

Shelter said the New Year could bring a risk of homelessness for those struggling with housing costs and urged anybody experiencing problems to seek help.

Housing Minister Grant Shapps said: “The sheer scale of the global slowdown has left many hard-working families struggling to make ends meet. So I’d urge anyone who is getting into difficulty to seek help in getting their finances back on track.

“Assistance can be sought by searching online for the government’s Mortgage Help website or by visiting organisations who can provide free, independent guidance such as Citizens Advice. The quicker households act to get help, the more options they will have available to them.”

The insolvencies experts warned the number of people turning to payday lenders – who charge interest rates of several hundred percent – is unlikely to wane in the current economic climate as increasing numbers of people need extra cash to see them through until payday.

Some 60% of those questioned said they were worried about their levels of debt, while 45% said they struggled to make their money last until their next payday.

Sixty-two percent of people aged between 22 and 24 years old said they often could not make their wages last a month.

R3 said the survey revealed money worries at the highest level it has ever seen and said its figures suggest as many as 3.5 million people will apply for a payday loan over the next six months.

The payday loan sector has expended rapidly since mainstream lenders restricted their loan books in the wake of the financial crisis.

Frances Coulson, R3 President, said: “It’s worrying to see that the 16-24s are developing bad money management skills so early on. Fewer people than last year, across the board, have borrowed money but there are still some weeks until Christmas. With unemployment figures up, we can only expect to see more people saying they are struggling to afford the demands of the festive season.”

A woman who has taken out a payday loan told the BBC how expensive debt can quickly get out of control: “A lot of them know because you’re going to be in a bad position on the next month, so they’ll offer to pay just the interest the first month and roll it over to the second month. So you’re just paying interest on the first repayment then on the second month you’re paying interest and capital.

“You can get into a cycle where you’re just paying off these little amounts thinking it’s manageable, not realising you’re racking it up.”

R3’s research also revealed that that saving is at a low 27% of people have no savings whatsoever, up sharply from 19% in the previous quarter.

An average overpayment of £557 was taken from the pay packets of over 40,000 borrowers in the last financial year after the SLC continued to take payments from graduates who had already cleared their debt.

Although the number of former students affected by overpayments was down year-on-year, the amount taken in error was up by £15 million from the 2009/2010 tax year.

The SLC is supposed to notify Her Majesty’s Revenue and Customs when borrowers have cleared their outstanding debt so that payments can be stopped. Student loan repayments are taken directly from the pay packets of borrowers, supposedly until the money they owe has been paid in full.

The company says it endeavours to pay any overpayments back as soon as is possible, but the consumer group Which? reported last year that it can take up to six months for graduates to get their money back, causing temporary financial hardship.

Dan Moore from Which? Money, said: “It’s dreadful that payments are being taken from ex-students’ accounts, even though they have already faithfully repaid all the money they owed. The problem is that the repayments system is woefully inadequate.”

The SLC recommends that borrowers keep a close eye on their repayments, but as the company rarely sends out statements, this can be difficult.

Martin Lewis of Moneysavingexpert.com told Channel 4 News: “It doesn’t help in the current climate to be taking away disposable income. Unfortunately without a massive re-jig of the entire student loans system, I can’t see a solution other than waving a huge red flag alerting people to this.”

Stella Creasy, Labour MP for Walthamstow, who proposed the motion with Justin Tomlinson, the Conservative representative for North Swindon, said that poorer consumers shut out of mainstream credit are “sitting ducks” for these firms that can charge over 2,500% APR. Customers are also hit with punitive fees and charges if they miss their repayments.

The motion, which has cross-party support, will be discussed by the Commons backbench business committee and could receive a full hearing as early as next month.
Research suggests that some 1.2 million Britons use payday loan companies to take out short-term loans to tide themselves over until they are paid each year. The market is said to have grown fourfold over the past two years as mainstream banks and other lenders have tightened their lending criteria.

Ms Creasy said she was moved to act after speaking with one of her constituents who told her she had nine loans outstanding from the same payday lender. She said: “People who are shut out of mainstream credit are sitting ducks for these companies. There are so few of them dominating the market that there’s no proper competition.”
Ms Creasy tabled a Ten Minute Rule Bill in November seeking protection for poorer consumers who are vulnerable to payday loan providers and doorstep lenders. She said at the time: ”In my constituency of Walthamstow there are lots of people who can’t get credit or store cards or who need to borrow at the end of the month ahead of payday. This government needs to understand action is needed now to address the high cost of lending which exploits some of the poorest people in our communities who can least afford the charges door step lenders set.

“We also need the banks to play their part in ensuring access to debt management and counselling and help more people access affordable credit through credit unions and the post office. I’ve brought forward legislation which if passed will protect not only consumers in Walthamstow but across Britain from these legal loan sharks. I hope the Government will recognise the need to act and back these proposals”

Lenders such as QuickQuid and Wonga, who recently courted controversy when they were allowed to sponsor late night tube services in London on New Year’s Eve, argue that the headline APR rate they are forced to quote by law is misleading due to the fact that the credit they provide is extended for only a matter of weeks.
Errol Damelin, founder of Wonga.com, speaking last year in defence of his company’s agreement with Tfl, said: “Wonga is totally transparent about how we operate and how we charge for the short-term loans we provide. Our customers know exactly what they can expect to pay”.

The interest charged on unsecured loans leapt after the credit crunch in 2007 as lenders sought to protect their positions and has stayed high as economic uncertainty has continued to dampen the market.

Six big brands have lowered their rates in the last fortnight with reductions ranging from 0.1% to 2.4%. The biggest discounts have been applied to larger loans over £7,000.

M&S Money have cut the amount of interest they charge on a loans between £7,500 and £15,000 from 9.9% to 7.5% from tomorrow whilst Sainsbury’s Finance have dropped their rates from 7.7% to 7.4% on loans of the same size for customers with a Nectar card.

HSBC, Tesco Bank, First Direct and Barclays have also announced price decreases but only the offerings from M&S and Tesco are available to new customers.

Borrowers looking to take out smaller sums will not benefit from the price reductions with many still being forced to pay interest rates well into double figures on loans of up to £3,000. Some lenders are charging rates higher than those levied by credit card issuers with Smile and Santander offering personal loans of £2,000 at 19.9% and 18.9% respectively.

Andrew Hagger, of Moneynet.co.uk, said: “It’s welcome news for customers to see loan rates falling at long last, and from some of the largest providers in the market. It’s a shame that the rate-cutting has, apart from Tesco and M&S Money, been targeted at existing customers only.

“Smaller loans may be considered less profitable and a greater risk. However, if consumer spending is to remain strong despite the VAT hike, then lenders need to do their bit by trimming the cost of borrowing across the board.”

Tim Moss, head of loans and debt at moneysupermarket.com, said: “With many consumers reviewing their finances in the New Year, it is great to see providers creating some healthy competition in the unsecured loans market after a period of relative inactivity.

“For those looking to borrow over £7,500 there are some excellent deals and in some cases it pays to borrow slightly more as it would cost you less overall. Unfortunately, we have yet to see rates drop as rapidly for smaller loans.”

The rate cuts come as research from Sainsbury’s Finance shows that more than a third of people looking for a personal loan do not shop around for the best deal and take up the first product for which they receive a quote.

For some customers this can mean paying up to 18.3% over the odds which translates to an extra £1,404 over the course of a three year £5,000 loan.

Steven Baillie, head of loans at Sainsbury’s Finance, said: “Given the increase in number and popularity of price comparison websites it’s surprising that so many people still go straight to their high street bank without comparing deals. There are many deals to be had but you simply won’t know how much you can save until you shop around a little.

“The difference in price between the most competitive loans and the rest of the market can be literally hundreds of pounds.”

26% of people interviewed said they had lent money to a friend during the past 12 months, on average lending money to four different people, advancing an average of £133 to each one.

Just as importantly the survey revealed that less than half of the money lent during the past year has been repaid.

One in five said they had lent their friends more than they could afford, while 19% admitted they “could not even remember” how much they had advanced.

Comfortingly, 10% of people said they could afford to write off the debt as they did not need the money back.

Although people do not charge financial interest on money they have lent to friends, many do get something. Some are bought alcohol by the person they lent to as a thank you, while others do them a favour in return, or give them a kiss or a hug, or take them for a meal. Though £500 for a hug does seem a little high and this form of repayment is unlikely to catch on with commercial lenders.

As nominal as these repayments seem they are important. Over 40% of informal lenders may be reconsidering their friendships after getting nothing as a thank you. Of course it is an open question of whether this really worries the borrowers – the old saying about closing the stable door after the horse has bolted comes to mind.

Doug Strachan, director of financial services at the Post Office, said: “Understandably, millions of households across the UK have needed to tighten their purse strings as the recession has taken its toll, and with money hard to come by from many lenders, people can be thankful that they have such good friends they can rely on.

“Not only does this research show another side effect caused by the recession, but it highlights how people want to help others, outside of their immediate families, through tough times.”

New research by insolvency trade body R3 has revealed that nearly 70,000 people in Britain have contacted either a loan shark or doorstep lender because of financial difficulties.

Their questionnaire revealed that a total of 67,000 people have contacted either a loan shark or doorstep lender about their debts, whilst a further 13% have considered contacting either a loan shark or a doorstep lender because of financial difficulties.

According to R3’s research, there are 961,000 people in Britain who say that they are ‘struggling with debt but have not sought help’, whilst one in four people (23%) struggling with debt admit to avoiding the people that they owe money to, while a further 30% of people struggling with debt have not spoken to their family or partner about their problems.

Steven Law, President of R3, commented:

“Going to this source [either a loan shark or a doorstep lender] for financial resolution will simply build up a larger store of debt and create more pressure and stress. We must highlight the importance of obtaining professional advice over panic measures that will worsen the problem.

“Post-recession we stand on the brink of a personal insolvency crisis that will take years to work through the system as these findings indicate.

“Clearly traditional fears of what others may think or the fear of bankruptcy is still putting people off seeking a solution to their problems. Unfortunately, avoiding the problem or going to the wrong source is likely to only increase the eventual likelihood of bankruptcy.”

According to research by Sainsbury’s Finance, £37 million was taken out in loans last year to pay school fees, university fees, and general education costs.

With the cost of education increasing by 5% in the past year (to February 2010), Sainsbury’s Finance estimates that just under 4,400 personal loans with an average value of around £8,500 were taken out.

In terms of how this breaks down, Sainsbury’s Finance estimates that around 1,100 loans worth £12.25 million were taken out to help pay for school fees. The corresponding figures for university and college costs were 1,900 loans worth £13.56 million.

Their research also demonstrates regional variations in the amount spent on education. For example, those in London spent on average £770 a year (a total £2.34 billion spend for households in the region), compared to £208 in the North West (a total £609 spend for households in the region).

Steven Baillie, Head of Loans, Sainsbury’s Finance said: “The cost of education has been rising. School fees rose by 5.9% in 2009, and the education component of the Consumer Price Index increased by 5% in the 12 months to February 2010. These rises can be hard to bear in difficult economic times, so it is not surprising to see many people taking out personal loans to help with this cost.

Parents and anyone paying for education, such as professional qualifications, need to make sure they are shopping around for the best loan rate available and not simply turning to their current account provider.”

New figures from the Council of Mortgage Lenders show that the number of house purchase loans in Scotland during Q1 2010 matched the rest of the UK by falling.

Such loans fell by 33% in Scotland, from 14,400 (worth £1.6 billion in the last three months of 2009) to 9,700 (worth £1.1 billion in the first three months of 2010), perhaps reflecting the fact that many consumers brought forward their home purchases to take advantage of the stamp duty holiday on properties valued under £175,000 before it ended in December last year.

However, the number of house purchase loans in Q1 2010 was still higher than the number made in Q1 2009, with Scotland’s share of UK house purchases rising from Q4 2009.

Similar statistics are reflected in loans made to first-time buyers: there was a fall from last quarter, but an increase from twelve months ago. First-time buyers now account for 40% of the house purchasing market in Scotland.

The remortgage market also dropped in Q1 2010 compared to the previous quarter, with a 22% fall being recorded, and a year on year fall of 36% being recorded.

Kennedy Foster, Scotland Policy Consultant, Council of Mortgage Lenders, said:

“The pace of recovery in Scotland at first sight appears slower than in the rest of the UK, but in fact throughout the current housing cycle, market activity in Scotland has followed that of the whole of the UK very closely, but with a lag of around one quarter.

“As in the rest of the UK though, the low level of house sales seen in the first three months of 2010 can be attributed to two events. The end of the last stamp duty holiday in December 2009 will have caused a drop in house sales at the start of the year and the severe winter weather seen in Scotland in January and February will have adversely impacted on the market.”

New research by Santander Cards suggests that the average spend on weddings for average wedding guests in the UK has reached £380 per wedding, equating to a national spend of £10.45 billion.

The biggest outlay that wedding guests face is travel and accommodation (£210), followed by a wedding present (£131), outfit and accessories for the day (£123) and the cost of attending the hen or stag do (£114).

When it comes to funding the cost of attending a wedding, 65% of Britons use their salary, 27% rely on savings and 14% use a credit card. However, 4% have had to resort to other means of borrowing to fund the expense of being a wedding guest, with 3% borrowing from family or friends, and 1% using a personal loan.

With the average age for first marriages in England and Wales currently standing at 32 for men and 29 for women, it’s no surprise that those aged 27 to 34 are most likely to be attending a wedding this year, with nearly half (47%) of this peer group attending at least one wedding. For the 5% who are attending three to four weddings, the average total cost can work out at £1520.

Emma Roberts, Director of Santander Cards, said:

“It’s easy to overlook the cost involved in being a wedding guest but the outlay can be significant, both before and during the big day. The last thing people want to be thinking about when preparing for a loved one’s wedding is the expense involved but costs can quickly mount up, especially for those who have several weddings to attend in the same year.

“To avoid suffering a financial hangover long after the wedding festivities have come to an end, those who have put spending on a credit card should make sure they transfer their balance to a 0% deal to manage their money as effectively as possible.”

The number of people taking out personal loans to consolidate their debts has dropped sharply over the last two years new figures from Sainsbury’s Finance reveal; perhaps indicating that many borrowers are attempting to pay off their debts rather than consolidating them.

Two years ago (2007), £1 in every £13 borrowed by Sainsbury’s Finance personal loans customers was solely for debt consolidation purposes. In 2008 this dropped to £1 in every £19, falling to £1 in every £50 in 2009. Contrastingly, large purchases such as home improvements and cars are becoming much more common reasons for people to take out a personal loan.

The supermarket bank says that a decline in debt consolidation may be an indication that the difficult economic climate has led debt-conscious consumers to try and pay off their debts, an analysis that backs up Bank of England statistics which show that for five consecutive months in the latter half of 2009, repayments outstripped new unsecured consumer credit.

Steven Baillie, Head of Loans at Sainsbury’s Finance, said:

“Debt consolidation has always been one of the most common reasons for people to take out personal loans, but while more and more people are taking out a loan for other reasons, there has been a sharp decline in the proportion of people borrowing money in order to consolidate their debts. This suggests that more and more people are choosing to repay their debts rather than consolidate them.

“However, for those with multiple debts, consolidation is still one way to reduce their monthly outgoings as long as they look around for the best rates on the market, which could save them a considerable amount in repayments.”

The Government’s target for inflation is 2 per cent, so having the Retail Prices Index (RPI) hit 3.7 per cent, and the Consumer Prices Index (CPI) hit 3.5 per cent, is bad news for savers. This is higher than the rate you can get on most savings accounts in the UK, so your savings are now growing at a slower rate than prices are rising – falling in real terms.

So what can you do to get yourself back in the black? You need to get a rate that beats inflation. Here are our tips to do just that:

1. Avoid the tax

Yes, there are still some accounts out there paying a better rate than inflation, but you need to look for it – and you need to take into account any tax you have to pay. So the best place to start is with individual savings accounts (Isas). These are tax free, so the rate on offer is what you end up with in your pocket.

The Halifax Fixed Rate Isa is paying 4.25 per cent on £500 or more providing you can keep your money tied up for four years.

Anyone over 50 can put up to £5,100 into an Isa this year, so they can benefit even more. The rest of us can put £3,600 into an Isa this year, but get the extra allowance after April 6.

1. Beat the inflation rate after tax

This is tough, but it can be done. If you are a basic rate taxpayer, you need to get 4.63 per cent on your savings before tax to keep pace with inflation, according to data from Defaqto. You can beat that, with the 4.75 per cent on the Nationwide e-bond, providing you deposit at least £1 and can keep that money tied up for five years. If you have £50,000 to deposit, you can get that rate up to 5 per cent.

Looking outside the traditional savings arena can give you even more. There are two current accounts which will beat inflation for you – the Alliance & Leicester Premier Direct Account and the Santander’s Preferred In-Credit Rate Account. Both pay 6 per cent AER, which is fixed for a year.

You must pay at least £500 a month into the former, and £1,000 a month into the latter to comply with the terms. You will only get the 6 per cent on a maximum of £2,500 in the account, so do not leave any more than that in there. Once you have deposited the required amount for the month, make sure you withdraw it.

Since the rate is only fixed for a year, you need to rethink your strategy after it ends by checking what deals are available.

Unfortunately, if you are a higher rate taxpayer, you can only beat inflation at the CPI rate of 3.5 per cent – you would need 5.83 per cent as a minimum to beat this inflation rate, which is possible with both Alliance & Leicester and Santander, but at the RPI rate, you would need 6.17 per cent, according to stats from Defaqto.

The only place you can get that is on a regular savings account linked to HSBC’s new Advance account, which will pay you 8 per cent. But you have to pay for this account, so you would struggle to get the value from it.

1. Be happy – your debt is worth less than it was, but reduce the cost of it.

Rising inflation is the friend of those in debt. If you have borrowed money then rising inflation means that the value of that money is less than it was when you borrowed it.

Does this have an impact in real terms? Yes it can. Apart from the above, inflation is the measure by which wages are increased – so the higher the level of inflation, the higher any pay rise will be, and the more you will have available to pay off your debt. In the current circumstances, a pay rise may not be on the cards for some people, but the premise still holds.

If you would rather not wait, then move your debt to a lower rate than you are currently paying if you can. Get a 0 per cent credit card, (Typical APR variable) or a lower rate loan.

Virgin won’t extend your 0 per cent deal. This is how the lenders make money – they are banking on you not having paid off all your credit card debt before the deal runs out. But you can do almost as well elsewhere. Here are our three top tips to help you get the best deal for your debt transfer right now:

1. Go for another 0 per cent deal

There are plenty of other deals out there, so go and get yourself one. The best alternative for existing Virgin credit card holders is Barclaycard Platinum. It is offering 15 months 0 per cent interest on balance transfers, so just one month behind the Virgin card. This has other benefits too.

The transfer fee on this card is lower than Virgin – at 2.9 per cent rather than 2.98 per cent with Virgin – and the default interest rate is currently lower, at 15.9 per cent compared with 16.6 per cent.

If you are moving from a non-Virgin card, then choose the Virgin card – it is still the best 0 per cent deal out there right now, at 16 months.

2. Use a current account with a 0 per cent overdraft

If you cannot get another 0 per cent card, then see if you can get an account with an agreed overdraft limit and 0 per cent interest. You need an overdraft big enough to cover your credit card balance though.

Alliance & Leicester’s Premier Direct Current Account has a 0 per cent deal on overdrafts for new customers for 12 months from when you open the account. After that, if you are within your agreed overdraft, then you would pay 50p a day up to a maximum of £5 a month – there is no interest currently applied if you are within your arranged limit, but that could always change so check the terms.

The most you would pay in a year for this facility under the current terms is £60. Bear in mind if you had, say, £3,000 outstanding on your card with Virgin and went to the 16.6 per cent rate, then you would be paying £498 a year in interest alone. So you could save yourself £438 a year this way if you can get an agreed overdraft for £3,000 at 0 per cent.

You would not have to make any specific monthly repayments, unlike on a credit card, so be disciplined about reducing the overdraft.

3. Get a low interest loan

If you cannot get a 0 per cent credit card deal, or the 0 per cent overdraft, then reduce your interest payments with a low interest loan.

Nationwide customers can currently get 7.6 per cent on loans, while Alliance & Leicester is offering 7.9 per cent to existing customers, or exclusively through certain partners such as TotallyMoney.com.

This is nowhere near as good as 0 per cent, but even with Alliance & Leicester’s Personal Loan Alliance & Leicester’s Personal Loan, you would still be saving yourself £231 a year in interest compared to leaving a £3,000 debt to go onto the standard 16.6 per cent rate on the Virgin card.

Of course, these tips apply no matter what 0 per cent card deal you are coming off of at the moment. Don’t get suckered into paying the high interest rates of the credit card providers. They are relying on you to do it, so beat them at their own game.

The product is available for loans of between £7,500 and £15,000. Nectar card holders applying successfully for a loan will also benefit from double Nectar points on their shopping for two years. According to Sainsbury’s, this means that customers who spend £50 a week with Sainsbury’s and have a Sainsbury’s personal loan as well as a Nectar card would receive £52 worth of Nectar points a year.

To compare this loan with others available in the marketplace, visit http://www.totallymoney.com/loans/.

Despite a rocky start, it seems the Government’s car scrappage scheme is succeeding in its mission to stimulate the motor vehicle market in the UK.

The UK car scrappage scheme was announced in the Budget speech on April 22nd, and allows owners of cars and small vans registered before 31st August 1999 to trade them in at participating dealers for a £2,000 ‘scrappage’ allowance against a brand new unregistered car or van. Now, new figures from Sainsbury’s Finance suggest that the scrappage scheme is directly responsible for a 37% increase in the value of personal loans taken out to purchase cars in the 3 months immediately after 18th May 2009, when the scheme was introduced, compared to the average monthly value before the scheme began.

According to the report, an estimated £61.2 million of personal loans per month have been taken out to purchase cars in the UK since the scheme launched, compared with a monthly average of £44.7 million in 2009 beforehand. The monthly average loan value for a car purchase is £7,515.

Steven Baillie, Head of Loans at Sainsbury’s Finance said:

“Since the Government’s scheme has been introduced we have seen a sharp spike in the number of loans people are taking out in order to buy a car, which is hopefully a good sign that the motor vehicle market is coming back to life. People considering buying a car, however, must remember to shop around for the best value loan they can find if this is how they decide to fund their vehicle – it can make a big difference to their repayments.”

Meanwhile, the latest figures from finance website Moneyfacts.co.uk suggest that personal loan rates continue to rise.

Michelle Slade, spokesperson at Moneyfacts.co.uk commented:

“In the last six months alone, £335 has been added to the cost of the average £25,000 personal loan, taking the total increased cost for borrowers on a £25,000 personal loan since the crunch began to a staggering £1,804. Unemployment continues to rise and lenders are worried that an increased proportion of their customers will default on their loan. It is highly likely that new customers are paying an increased premium to cover the defaulting customers who took out loans the previously more competitive rates.”

“The upward trend in rates looks set to continue. Anyone in need of a personal loan, really needs to ensure they do their homework to find the best deal possible or they will be left severely out of pocket.”

If are considering taking out a personal loan, TotallyMoney.com can help make sure you get the best deal possible. We have access to great deals from top high street lenders. Simply visit http://www.totallymoney.com/loans/ now to compare rates – you could save a packet.

(Photo by iboy_daniel)

Single premium PPI products have long been controversial, particularly with consumer watchdogs who claim that the policies are misleadingly front-loaded, accrue outrageous interest, and have strict pay-out terms and conditions. In early 2009, the FSA announced measures to abolish single premium PPI products for unsecured loans among willing firms in the industry.

Firms representing more than 40% of face-to-face sales in the ‘Single Premium Unsecured Personal Loan PPI’ market have agreed to review these sales and redress those consumers identified as mis-sold. The FSA has also confirmed that ongoing supervisory action will continue with the remainder of this market place.

For complaints about all PPI products, new measures will tackle the key issue that too many complaints are rejected by firms and then overturned by the Financial Ombudsman Service (FOS) in favour of the consumer:

• new guidance (due to take effect by the end of the year) will ensure PPI complaints are handled properly, and redressed fairly where appropriate – the FOS has indicated support for the FSA’s proposed approach; and

• a new rule will require firms to reopen some 185,000 previously rejected PPI complaints and reassess them against the guidance.

In addition to these measures tackling PPI in relation to unsecured loand, the FSA is launching targeted assessment of sales practices for PPI on secured loans and credit cards. The FSA states that if the potential for mis-selling is identified, pro-active reviews by firms may be extended to these areas too.

Jon Pain, FSA managing director of retail markets, said:

“Consumers should not be pressured or deceived into buying PPI and they are entitled to have a policy properly explained to them. It is unacceptable that despite previous warnings about poor sales practices, backed by 22 enforcement cases and significant fines, the PPI sector still needs the FSA to intervene on this.”

“And the outcome of a complaint about a PPI sale should not depend on whether or not the complainant persists past the firm on to the FOS.”

“This is the last chance for the industry to show that it can act fairly, consistently and in the best interest of consumers on PPI. All firms operating in this sector should take note and where necessary get their house in order. Where we find questionable practices in sales or complaint handling, firms can expect that we will take action.”

Louise Hanson, head of campaigns at Which?, said:

“While it’s good to see the FSA make firms review cases they’ve wrongly dismissed, we’re concerned about loopholes. Consumers could still be left paying over the odds or with too little compensation, so the FSA needs to monitor the review process closely.”

“The FSA must also take stronger enforcement action against firms with bad complaints handling. It’s not enough to tell them to go back and do better the second time round. Unless big fines are levied, businesses will keep on unfairly dismissing complaints, safe in the knowledge that if they get caught, all they’ll have to do is go back and look at them again.”

“PPI isn’t the only area where FSA action is needed – the Ombudsman’s complaint statistics show too many firms selling a range of different products, which have had a higher-than-average number of complaints upheld against them. The FSA must take swift action to get these firms to review their cases, to improve the industry’s attitude to complaints handling.”

Overall, business written by FLA members, who provide secured and unsecured loans, credit and store cards, and motor finance, fell by 17% in July 2009 compared with the same month in 2008 – a difference £11 billion.

New consumer finance business in the three months to July was 16% lower than in the same period a year earlier, but this is similar to the rates reported in May and June, suggesting that the contraction rate is stabilising. However, the FLA has warned that the pressures that led to shrinkage in the consumer credit market continue to pose a risk, not least the problem of access to affordable wholesale funding.

The FLA figures show that the lack of affordable wholesale credit has made it difficult for consumers to get a secured loan, with lending in this market down 83% in the last three months. Consumers continue to take advantage of finance deals in the high street, which has led instalment credit levels to grow by 4% over the same period.

Geraldine Kilkelly, Head of Research and Chief Economist:

“Our figures suggest that the rate at which consumer credit provided by our members is contracting has stabilised. But over the last year, FLA members provided £10.9 billion less than they provided in 2008. There is a risk that if the burden of new regulation drives credit providers out of the market, consumers will be faced with a limited choice of lenders. This could affect the rate of economic recovery.”

According to the report, since the start of September, three unsecured personal loan providers have implemented rate hikes of up to 1.2% for new customers. This product ‘tweak’, although seemingly small, could cost personal loan customers an extra £322 in interest paid on a typical loan of £10,000. With UK consumers currently forking out £181 million in interest daily, this will only add to an already hefty bill.

As consumers struggle to manage their debts in the current climate, their chances of consolidating to a low cost loan have also been vastly reduced compared to this time last year. There are currently 36 personal loans available to consumers, this is compared to 57 loans that were available this time last year, a drop of 37%. At the same time, the average loan rate has increased from 9.04% to 9.08% in the last year.

Providers that have increased rates since the start of September include Marks and Spencer Money, Egg and Alliance & Leicester.

Louise Bond, personal finance expert at uSwitch.com, said:

“As consumers struggle to make ends meet and manage their finances, loan providers are looking to offer the best rates to those whose financial behaviour they can closely inspect – which are their existing customers.”

“Last year 1.3 million consumers used an unsecured personal loan for debt consolidation purposes. However, with the number of personal loans available dropping by 37% this year and rejection running high, it would be highly unlikely that a similar number of consumers would be able to consolidate their debts this year. However, for those that are thinking about, or attempting to do this, it would definitely be worthwhile finding out what rates existing providers can offer, as it seems loyalty is one of the only aspects that could win consumers better interest rates at the moment.”

If are considering taking out a personal loan, TotallyMoney.com can help make sure you get the best deal possible. We have access to great deals from top high street lenders. Simply visit http://www.totallymoney.com/loans/ now to compare rates – you could save a packet.

The Halifax research found that almost half (49%) of 55-64 years would like to take time out to travel and over half (58%) of 16-24 years old would be prepared to wait until later life to do this. Even in the current economic climate, over half (59%) of 55-64 year olds wouldn’t be put off taking a trip of a life time.

But a whole year out is beyond the reach of many. The research shows that more Brits are choosing shorter trips to the beat the travelling bug and ensure they don’t spend more money and time than actually needed. Time is precious for 12% of Brits who would prefer to travel for only three to six months, whilst just over one in ten of us (11%) would prefer to be away for six months or more.

And it’s not just time that Brits have to take into consideration, there is also the expense to deal with. Taking time out to travel can be costly with the average 18-25 year old spending up to £4,000 on their travels. One in five (20%) Brits travelling for only three months expect to spend £2,000 whilst one in five (20%) travelling up to six months expect to spend £3,000.

The research shows that the average grey gapper (aged between 55 and 64) expects to spend £2,604.20 taking time out, however 18% would be willing to spend over £5,000. And when it comes to paying for the trip of the life time, 23% of Brits would use unsecured borrowing such as credit cards, loans and overdrafts to cover their costs, while 22% of people aged 55-64 would consider working whilst travelling to ensure they can cover the costs of their dream trip.

Russell Galley, Director of Loans at Halifax said:

“A mature gap year is a wonderful opportunity to experience different ways of life and see other parts of the world. But such a big adventure requires careful financial planning.”

If are considering taking out a loan to cover the cost of your ‘grey gap year’, TotallyMoney.com can help make sure you get the best deal possible. We have access to great deals from top high street lenders. Simply visit http://www.totallymoney.com/loans/ now to compare rates – you could save a packet.