It’s not uncommon for individuals to suddenly find a cash shortfall in their finances, hence the popularity of payday loan services which offer an unsecured, short-term cash advance until payday. However, this morning it was the banks themselves who have had to come and beg for almost £40bn of new capital in a move which the BBC’s business editor, Robert Peston, described as ‘perhaps the most extraordinary day in British banking history’.
The Royal Bank of Scotland, HBOS and Lloyds TSB are all to receive money in an effective semi-nationalisation by the Government. This will mean that taxpayers will end up owning around 60% of RBS and about 40% of the merged Lloyds TSB and HBOS. Meanwhile, Barclays is to seek to raise £6.5bn without calling upon the Government for help, saying it was confident of raising that amount from shareholders and investors. This means it will not have the government influencing its day-to-day decisions.
For those banks accepting some degree of Government control the need for payday loans for their own directors looks more likely. The government are insisting that senior directors should not receive any cash bonuses this year and should receive future bonuses in the form of shares. Robert Peston suggests that this is ‘in the hope that this forces them to take a long-term approach to the way they manage what are now our banks.’
For the rest of us needing to borrow money, whether for a payday loan, a vehicle loan or a new mortgage, comes advice on how to turn yourself into a model borrower. The Times is offering a series of tips on how to make your face fit and improve your credit report in order to raise the necessary cash. With banks and insurers becoming increasingly cautious, Tim Moss from comparison site Moneysupermarket.com thinks that, ‘Soon, you are going to need a spotless credit record simply to have a paper delivered to your door.’
Borrowers looking for a new mortgage are advised to cut the amount they need to borrow. Broker David Hollingworth from L&C Mortgages says, ‘If you have savings marked for your mortgage, now is the time to use them. If you are planning to remortgage and have the capacity to reduce the size of your mortgage, you are a less risky bet in the eyes of the lender and can also qualify for lower rates.’ He also suggests that those who are looking to remortgage be realistic over the valuation of their property.
And to those who are looking to borrow money on their credit card or other type of unsecured loan, Tim Moss suggests that the ‘must-have accessory this year is a great credit rating.’ To make sure that your credit report is spotless Neil Munroe from credit reference agency Equifax says, ‘Make sure that you are on the electoral roll, and if you have credit or store cards that you never use, close the accounts. Not only will this mean you have less outstanding debt, but it also shows that you can settle accounts.’