Talk With My Lender Friend Today

[aa3]

One of my friends is a lender who is not really interested in the 'big picture'.. but does his job well and has lots of friends.

He was saying over the last two days he turned down 5 people for consolidation loans. They were middle class, gen X couples who had consumer debt financed ~20% in the range of £30,000-£60,000 pounds. On credit cards mainly, but also retail store stuff, and even some car loans at insanely high rates.

These couples had in the past done consolidation loans every few years, so now that they were starting to get crushed under the weight of the consumer debt they had racked up since the last consolidation they came in. Some were near paying £1,000 a month in interest on the consumer debt.

So they assumed since it had been 2 or 3 years since they last came in, their homes would have appreciated yet more and they would put it on home equity. Sadly their homes are appraised at staying at about the same price since last time, so there is no equity to pull out. So my friend had to turn them down. The best he could do was finance a small part of their consumer debt onto home equity.

The couples were shell shocked.. as they are now essentially screwed. No equity in their house and in one case £60k in credit card debt at 20%.

Stage 1 is they aren't going to be able to keep spending beyond their income on the credit. So a dramatic reduction in consumption.

Stage 2 is they are going to have to make these huge interest payments.

Stage 3 is they are going to have to pay back the principal.

(Stage 4 is once they realize how hard it is they'll just default on everything imo).

[Pent Up]

Losers.

[Chest Rockwell]

Someone I know is in a similar situation with CCs. He's run up about 20k of debt and would usually transfer balances to get a low IR. He recently tried to shift a number of CCs to others with intro offers but was declined. It's as if the music stopped but there were no more chairs left!

He's fooked as he's now stuck paying over 18% APR on the existing cards...and he also has a wife who just keeps on spending! He is a "home owner" but there is no equity in the home because him and his missus went for a 100% mortgage.

Smart people!

Edited August 20, 2011 by Chest Rockwell

[catmandu]

No sympathy for people like this. They should think about these things a little more in advance.

They should pay for the stupidity. Unfortunately more than likely they quite literally won't.

[Tonkers]

I recommend they stop paying. The only thing that will sort out usury is if people stick two fingers up to debt. Politicians can't do anything to fumigate the parasites who have long lost or never knew the reasons for their existence. Can't pay, wont pay.

[aa3]

No sympathy for people like this. They should think about these things a little more in advance.

They should pay for the stupidity. Unfortunately more than likely they quite literally won't.

I wonder how much a percentage of the population does this. Especially what percentage of gen X couples. My gut feeling is the percentage is huge.

[Englebert]

Someone I know is in a similar situation with CCs. He's run up about 20k of debt and would usually transfer balances to get a low IR. He recently tried to shift a number of CCs to others with intro offers but was declined. It's as if the music stopped but there were no more chairs left!

He's fooked as he's now stuck paying over 18% APR on the existing cards...and he also has a wife who just keeps on spending! He is a "home owner" but there is no equity in the home because him and his missus went for a 100% mortgage.

Smart people!

A debt management plan or bankruptcy may be good suggestions to him. If he doesnt have the money, what are the banks gonna do...assasinate him? I know of loads of people - most of them non homeowners - who have literally had to use cc's to pay for basic things - food, rent, gas, electricity, petrol. In most cases, the principle has been paid off and it's the exhorbitant interest rates the banks have issued that have caused the debt to balloon. They either lower their mafia-esque interest rates or don't get paid. The banks have only themselves to blame. If they were foolish enough to lend him the money, they deserve not to get their rip off interest rates paid. My hope is that there is a mass default on credit card debt. It will, I hope, be the death knell to the whole CC business. It will probably happen too. Look around you, It's not just individuals...whole Countries can't pay their debts back...they're skint too.

[aa3]

Someone I know is in a similar situation with CCs. He's run up about 20k of debt and would usually transfer balances to get a low IR. He recently tried to shift a number of CCs to others with intro offers but was declined. It's as if the music stopped but there were no more chairs left!

He's fooked as he's now stuck paying over 18% APR on the existing cards...and he also has a wife who just keeps on spending! He is a "home owner" but there is no equity in the home because him and his missus went for a 100% mortgage.

Smart people!

I wonder if he guessed his home equity would rise by at least 20k so figured he could spend it now and roll it over soon enough.

Another thing I wondered about is what will happen to the economy if millions of people who were spending big hit a brick wall where they can't keep buying on credit.

[Tonkers]

I wonder if he guessed his home equity would rise by at least 20k so figured he could spend it now and roll it over soon enough.

Another thing I wondered about is what will happen to the economy if millions of people who were spending big hit a brick wall where they can't keep buying on credit.

I think we are about to find out!

[geezer466]

I wonder if he guessed his home equity would rise by at least 20k so figured he could spend it now and roll it over soon enough.

Another thing I wondered about is what will happen to the economy if millions of people who were spending big hit a brick wall where they can't keep buying on credit.

The brick wall was struck a few weeks ago. We are seeing the effects now with what negligible UK growth declining and the inevitable double dip looming..

Does anyone really beleive there won't be a double dip? The markets clearly do.

[Bob Loblaw]

One of my friends is a lender who is not really interested in the 'big picture'.. but does his job well and has lots of friends.

He was saying over the last two days he turned down 5 people for consolidation loans. They were middle class, gen X couples who had consumer debt financed ~20% in the range of £30,000-£60,000 pounds. On credit cards mainly, but also retail store stuff, and even some car loans at insanely high rates.

These couples had in the past done consolidation loans every few years, so now that they were starting to get crushed under the weight of the consumer debt they had racked up since the last consolidation they came in. Some were near paying £1,000 a month in interest on the consumer debt.

So they assumed since it had been 2 or 3 years since they last came in, their homes would have appreciated yet more and they would put it on home equity. Sadly their homes are appraised at staying at about the same price since last time, so there is no equity to pull out. So my friend had to turn them down. The best he could do was finance a small part of their consumer debt onto home equity.

The couples were shell shocked.. as they are now essentially screwed. No equity in their house and in one case £60k in credit card debt at 20%.

Stage 1 is they aren't going to be able to keep spending beyond their income on the credit. So a dramatic reduction in consumption.

Stage 2 is they are going to have to make these huge interest payments.

Stage 3 is they are going to have to pay back the principal.

(Stage 4 is once they realize how hard it is they'll just default on everything imo).

Default would mean losing their houses so is not an option for most.

[Bob Loblaw]

A debt management plan or bankruptcy may be good suggestions to him. If he doesnt have the money, what are the banks gonna do...assasinate him? I know of loads of people - most of them non homeowners - who have literally had to use cc's to pay for basic things - food, rent, gas, electricity, petrol. In most cases, the principle has been paid off and it's the exhorbitant interest rates the banks have issued that have caused the debt to balloon. They either lower their mafia-esque interest rates or don't get paid. The banks have only themselves to blame. If they were foolish enough to lend him the money, they deserve not to get their rip off interest rates paid. My hope is that there is a mass default on credit card debt. It will, I hope, be the death knell to the whole CC business. It will probably happen too. Look around you, It's not just individuals...whole Countries can't pay their debts back...they're skint too.

+1

First thing CC companies do if they sense someone is in difficulties is to raise their interest rates. Utter scum.

[Tonkers]

+1

First thing CC companies do if they sense someone is in difficulties is to raise their interest rates. Utter scum.

Capital One raised the barrier so high I simply cannot pay them. I just have to ignore ten phone calls a day. I have no assets available, what are they going to do? I will shortly move house and change my number, what then?

For the first time in my life, I don't care.

[winkie]

I wonder how much a percentage of the population does this. Especially what percentage of gen X couples. My gut feeling is the percentage is huge.

Lots....and there would be lots more if they got the chance to do so.....can you blame them when they see what the leaders who are supposed to be looking after our interests are doing...in Europe, USA, the banks, the way our kids are being encouraged to rake up debts to learn and live.....debt and having access to it is the new paradigm.

[interestrateripoff]

So continually living beyond there means and using the house as a cash machine to get the loan rates down and start again.

It sounds like they have a decent income I think a bit of fugal living for 5 or 10 years should sort it.

[Mr. Miyagi]

Default would mean losing their houses so is not an option for most.

I agree, default is only an option if you're a renter. As part of my job I see people in a shocking financial state all to frequently. My record thus far has been £37k unsecured debt but I frequently see people with £20k + and people in their 60's with 20 year + mortgages many of which are under £500 a month, which indicates to me that they are either IO or on the lenders SVR. It's all to common. One day the chickens are coming home to roost for lots of the British public

[19 year mortgage 8itch]

It sounds like they have a decent income I think a bit of fugal living for 5 or 10 years should sort it.

Personal responsibility is so last century.

That and the fact that paying off debt would see our current economic model fall off a cliff and we're told the flames will reach back up the cliff, over the top and enflame all of us still admiring the sunset over HMS Prudence on the distant horizon.

****** 'em. You, me and everyone.

[MrPin]

I agree, default is only an option if you're a renter.

Hmm, I got into a bit of trouble with a credit card "last time round"!

They eventually agreed to freeze the interest if I made token payments monthly!

When I got a job again I paid them off as quick as I could!

I did have a mortgage on a house at the time.

[winkie]

I agree, default is only an option if you're a renter. As part of my job I see people in a shocking financial state all to frequently. My record thus far has been £37k unsecured debt but I frequently see people with £20k + and people in their 60's with 20 year + mortgages many of which are under £500 a month, which indicates to me that they are either IO or on the lenders SVR. It's all to common. One day the chickens are coming home to roost for lots of the British public

It is not good out there.....people who are living beyond their means be it because they have to or have chosen to do so do not advertise it, there are lots out there.

[Mr. Miyagi]

Hmm, I got into a bit of trouble with a credit card "last time round"!

They eventually agreed to freeze the interest if I made token payments monthly!

When I got a job again I paid them off as quick as I could!

I did have a mortgage on a house at the time.

When your talking 10's of thousands of debt I very much doubt the banks will give such favorable terms.

[Englebert]

When your talking 10's of thousands of debt I very much doubt the banks will give such favorable terms.

The banksters may have to...eventually.

[MrPin]

It is not good out there.....people who are living beyond their means be it because they have to or have chosen to do so do not advertise it, there are lots out there.

[/quote

Some people choose to! Some years ago I bought an expensive car I didn't need, and then got divorced!

I was skint for ages! I didn't like it!

[MrPin]

When your talking 10's of thousands of debt I very much doubt the banks will give such favorable terms.

No, you are right, I was talking about less than £2k of credit card!

[Injin]

Capital One raised the barrier so high I simply cannot pay them. I just have to ignore ten phone calls a day. I have no assets available, what are they going to do? I will shortly move house and change my number, what then?

For the first time in my life, I don't care.

if it were me (and it has been) I'd say i was more than happy to pay if they could send some signed receipts and proof of cash changing hands.

Oh, and the actually double entry accounting, showing where the money came from.

[Lord D'arcy Pew]

Credit moved from being a financial stopgap to becoming income for many.

A person on £20,000 PA who borrowed an extra £5,000 PA would then live a £25,000 lifestyle. This become mainstream and excepted as normal by many.

The problems arise when they have to move back down to living off their true income. The pressures also increase if the debt principle needs to be reduced.

Without the credit income the £20,0000 PA income may well fell closer to £15,000 PA, a very big shock to the debt slaves indeed. Adding inflation to this mix will leave many with bankruptcy as the only option.

Edited August 20, 2011 by Lord D'arcy Pew