UK Credit Crisis

admin — Mon, 14 Mar 2011 20:12:08 +0000

They have been large drops in the shares of the banking, property and major companies, which have reflected the pressure of the credit crunch and unstable economic future.

As lenders look to be stricter with under writing policies a person could be labeled a high credit risk and adverse because of a minor financial error in their past.

Lending standards are tightening significantly, the tipping point is not yet at hand so far, credit worthy borrowers do have access to credit. But lending policy is reducing high loan to values, increasing credit checks and rejecting more high risk business.

Currently stricter credit controls for borrowers should reduce the pool of potential buyers liquidity and affordability factors may stop some customers from closing, while others may find it more difficult to sell their existing properties.

High borrowing levels and high house prices are now finally beginning to turn.

This has had an effect to banking shares, that have recently dropped sharply to reflex the current market. Banks are nervous about lending each other money and this has greatly effected some bank systems for example Northern Rock. Their system relied heavily on other banks borrowings
Late payments, arrears and defaults among adverse borrowers, who have poor credit or high levels of debt, are at a 10-year high in the US.

Lower house prices continued to affect many areas of the USA as defaults continued to rise across all mortgage product categories, including good clean borrowers with acceptable credit histories.
This is due to very bad lending where risk was too high but sidelined. Those customers now are struggling to refinance due to tighter controls and many are to be repossessed.

Also UK’s smaller businesses are potentially facing collapse as a result of the credit crunch, leading groups have warned, as lenders take back profit by charging the highest rate of interest on business loans since the late 1980s.

Which is better: term or permanent life insurance?

admin — Tue, 23 Feb 2010 15:00:13 +0000

The biggest financial decision you are likely to make is buying a home, closely followed by less expensive must-haves like a vehicle. But the one deal you should aim to get right is the decision on life insurance. This is the difference between leaving your dependents with an adequate amount of cash to see them through the times of economic hardship after your income is lost, and leaving them with nothing. In this, the decision on term as against permanent insurance is the key. Put the wrong key in the lock and you open a door into real financial hardship. So what’s wrong with term insurance? Think of this as like a bet. If you die within the term, your dependents are the winners. If you prove healthy and live too long, you lose the premiums you paid and your dependents get nothing. Now, when it comes to permanent insurance, this builds up a cash value. The longer you have the policy in place, the more valuable it comes as the premiums you pay attract investment returns. During your own life, you can take some of this money back or borrow using the fund as collateral. When the sad day finally comes, the benefits are paid out to your dependents less whatever drawings or borrowings you have made.

From these short sentences, you will immediately suspect the other difference between the products. Term life insurance is the cheap option. It gives you security in the amount of the benefits for the number of years you select. If you buy one term policy after another, the premiums are higher each time because your life expectancy is less on each renewal. Permanent insurance premiums are higher because a percentage of what you pay is invested on your behalf to generate the cash value. So your fund receives the benefit of the interest, dividends and other returns the investments generate. This makes the total of the cash value the key factor. Do you want a higher rate of return on the premiums? This can be for your own benefit should there be an emergency during your life. Or it can build up over the years for your dependents. If the answer is yes, you must be prepared to pay more to start off the policy – the first year’s premiums often disappear into a black hole representing set-up costs and the selling agent’s commission. But the amount you pay stays the same throughout the lifetime of the policy. So, with inflation, what starts out a struggle slowly grows easier to pay.

The real problem is the uncertainty of the future. Who knows how inflation may affect different aspects of life. What may be cheap now, may be expensive tomorrow and vice versa. So here are a few simple rules. If all you want is cover over the next few years (no more than ten), get life insurance quotes for a term policy. Ten years is not a long enough period of time to build up a worthwhile cash value. Estimate what benefits might be needed, e.g. your daughter will need $50,000 to cover her college tuition fees, and the total will set the amount of the insurance. If you are looking at a period of at least twenty years, you should think seriously about permanent insurance. Again, get life insurance quotes but you should also take advice on the different types of policy available and create or review your estate plan. Between ten and twenty years is a gray area and whichever way you decide is not going to be wrong.

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UK Credit Crisis

Which is better: term or permanent life insurance?