ChatterBank2 mins ago
Cost to borrow money
With the bank rate being reduced to just 1.5% why does it cost the consumer so much more to take out a debt?
Figues published by a comparison website:
Loans: 8%
Credit cards: 16%
Mortgage: 5%
Figues published by a comparison website:
Loans: 8%
Credit cards: 16%
Mortgage: 5%
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Loan interest rate has to be higher than bank rate - that is how banks make its profit and funds the business.
In the current climate banks aren't making money on the stock exchange, money exchange and other financial markets. Banks are losing money because of savers either spending their money or going elsewhere as the interest rates are not attractive to savers. People who use the interest on their savings to fund their day to day living costs are now having to draw on their capital.
Then there is risk - no job is safe so any loan is a potential risk to the bank.
With the amount of people going bankrupt or into VAs vast amounts of money are being lost on unpaid loans.
Credit card loans are high interest because if the debtor does go bankrupt, the credit card debt is way down on the list of priority creditors - the tax man and mortgage company are first, followed by secured loans and then the credit card companies fight over what is left - usually nothing.
In the current climate banks aren't making money on the stock exchange, money exchange and other financial markets. Banks are losing money because of savers either spending their money or going elsewhere as the interest rates are not attractive to savers. People who use the interest on their savings to fund their day to day living costs are now having to draw on their capital.
Then there is risk - no job is safe so any loan is a potential risk to the bank.
With the amount of people going bankrupt or into VAs vast amounts of money are being lost on unpaid loans.
Credit card loans are high interest because if the debtor does go bankrupt, the credit card debt is way down on the list of priority creditors - the tax man and mortgage company are first, followed by secured loans and then the credit card companies fight over what is left - usually nothing.
In addition the banks do not borrow at BoE base rate it is just that a base rate. Banks use the Libor .
Remember also that money is borrowed internationally on wholesale markets then split and lent to smaller borrowers. The banks have to lend out higer than the pay or they would make no profit and we'd be back to sq one.
It is odd that Brown and 'the eybrows' dont understand this concept.
Remember also that money is borrowed internationally on wholesale markets then split and lent to smaller borrowers. The banks have to lend out higer than the pay or they would make no profit and we'd be back to sq one.
It is odd that Brown and 'the eybrows' dont understand this concept.
>Credit cards: 16%
Well anyone who has a large "debt" on a credit card is pretty silly anyway.
Interest (at a high rate) is charged and added monthly.
If you dont pay it all off, next month you are charged interest on the interest you did not pay off last month.
The next month you are again charged interest on the interest and so on.
Terrible, terrible way to "borrow" money, and in this time of financial problems the best thing to do is pay off the credit card bill in one go, and then cut it up.
Well anyone who has a large "debt" on a credit card is pretty silly anyway.
Interest (at a high rate) is charged and added monthly.
If you dont pay it all off, next month you are charged interest on the interest you did not pay off last month.
The next month you are again charged interest on the interest and so on.
Terrible, terrible way to "borrow" money, and in this time of financial problems the best thing to do is pay off the credit card bill in one go, and then cut it up.
I agree people who borrow large amounts on a credit card can be almost put in the same category of those borrowing from loan sharks that many got caught up in.
I sometimes wonder what the purpose of these high street banks nowadays, it doesn't seem to satisfy the ordinary consumer or company. The impression I get is because of the deregulation of money, the whizz kids sitting at their dealing desks, �millions being bought and sold on the currency markets and the fat bonuses the system is no longer working.
Maybe we need a to resurrect the old type banking system which only caters for lending/savings transactions and leave the arm of the bank speculators to sweat in their own juice?
I sometimes wonder what the purpose of these high street banks nowadays, it doesn't seem to satisfy the ordinary consumer or company. The impression I get is because of the deregulation of money, the whizz kids sitting at their dealing desks, �millions being bought and sold on the currency markets and the fat bonuses the system is no longer working.
Maybe we need a to resurrect the old type banking system which only caters for lending/savings transactions and leave the arm of the bank speculators to sweat in their own juice?
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