Top Reasons Why People Apply For A Loan

The biggest single reason people apply for a loan is to purchase a home. Mortgages, where the borrower provides the property as security against non payment, are a huge segment of lending. An estimated 60% of all domestic property has some form of mortgage loan outstanding. The total value of all property loans as disclosed by the Bank of England at the end of July 2010 was £1,239 billion pounds. This compares to lending to individuals for other purposes of just £217 billion. As customers are adapting to the harsher economic times, this amount is slowly being repaid and has fallen from £225 billion in January 2010.

Credit card debt accounts for £58 billion of this total. An amazing amount given that the rates of interest for borrowing on a credit card are extremely high compared with a personal loan. This short term borrowing is probably the most expensive form of debt individuals carry for any period of time.

Away from short term debt the principle reasons for borrowing fall into three broad areas:

Debt consolidation – This is where customers take out a new loan on better terms to pay off existing debt at high rates. For example, it may be that there is a combination of credit or store card debt at 18% interest bundled with a personal loan taken out a few years ago at 12% interest. Even in today’s tough markets it may be possible to obtain a new loan to cover this at 10% over a longer period. This can greatly ease the pressure on family finances. Many people have woken up to this option and lending for this purpose has grown considerably since debt management companies have highlighted the benefits of such an approach.

Acquiring a vehicle – This will probably be the second most expensive purchase after a home. Manufacturers and dealers are well aware that most customers cannot pay cash for a new or used vehicle. Hence, there is a huge market in personal loans and personal contract purchase plans to make obtaining a vehicle affordable for those on a budget. Be it a car, van, caravan or motorcycle there will be a point of sale option for financing the purchase. Many banks and other financial institutions also target this as a specific area of lending.

Home Improvements – Whilst the main home may be acquired on secured loan, home improvements such as double glazing, new kitchens or furniture are usually paid for by borrowing on unsecured loans. These tend to be relatively short term reflecting the smaller amounts involved when compared to property loans.

Lenders focus on the ability to repay and so there are regional variations in the amount of credit granted to individuals. The wealthier regions have more appeal than the poorer regions in the North and West of the country. Less well off areas are the domain of the subprime lenders and doorstep lenders who use different products and techniques to approach the market. Weekly payments and short term loans from places like http://www.cashwindow.co.uk at high rates will be more common in these areas as people’s credit ratings are generally lower and less appealing to mainstream lenders.

 source: everythingfinanceblog.com

Moody’s upgrade seen next month

MANILA, Philippines - Following good appraisals, Moody’s Investors Service could finally upgrade the country’s credit rating as early as next month, an economist of a global bank said.

“We continue to anticipate that Moody’s credit rating upgrade will come through in the third quarter of 2013 or as early as July,” Citi economist Jun Trinidad said in a research note.

While the upgrade may be deemed “rather late” by investors, Trinidad said it could still be “supportive of an upbeat fundamental outlook.”

The New York-based debt watcher has held off from raising the Philippines to investment grade rating despite rivals Fitch Ratings and Standard & Poor’s (S&P) Ratings Services granting that coveted status.

Fitch and S&P now rate the country ‘BBB’, with a ‘stable outlook,’ following succeeding upgrades in March and May. Moody’s put the country one level below that, at Baa1, although with a positive outlook that suggests an upgrade soon.

Moody’s said the recently reported 7.8 percent first quarter growth and record budget surplus of P36.803 billion are “credit positive” that could impact on its evaluation of the Philippines.
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In his commentary released June 4, Trinidad said Moody’s long-awaited upgrade may be one of the “signals,” together with strong growth and central bank action, which the market awaits to reverse a recent plunge in the financial markets.

The Philippine Stock Exchange index, one of the world’s best performers, has lost more than a tenth of its value in just about 20 days since it last peaked on May 15. It recovered yesterday, adding 51.12 points to 6,609.010.

Meanwhile, yields of Treasury bills (T-bills) rose by more than 60 basis points on its last auction last Monday. This has reflected in the secondary market, where investors have charged higher on the sale of their bonds.

 “The market may be waiting for other signals to conclude that the long end of the peso bond curve has entered oversold territory,” Trinidad pointed out.

 “All that’s missing is Moody’s announcement of an investment credit rating upgrade to follow Fitch and S&P,” he added.

source: philstar.com

Phl pushes for another credit rating upgrade

MANILA, Philippines – The Philippines will make its case for another credit rating upgrade in October as it highlights the country’s sound macroeconomic fundamentals capped by a respectable growth in the second quarter.

“We will have meetings with members of the ratings committee to give them the bigger picture of what is really happening here,” said Claro Fernandez, chief of the investor relations office of the Bangko Sentral ng Pilipinas (BSP).

Discussions will involve Philippine officials and representatives from Fitch Ratings, Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service, Fernandez said.This will take place on the sidelines of the annual meetings of the World Bank Group and the International Monetary Fund from Oct. 12 to 14 in Tokyo, Japan.

“Of course, we are hoping for an upgrade. In fact, we are already starting work for investment grade,” he added.

The country currently enjoys its highest credit rating from Fitch and S&P at one notch below investment grade, while Moody’s places the country two notches behind although with a positive outlook.

Credit rating measures the capacity and willingness of a country to settle its debts. A positive outlook means an upgrade is possible over the next 18 months.

The Aquino administration, which has enjoyed eight positive credit rating actions over the past two years, has been pushing for an investment grade status, which would not only lessen interests paid on our debts, but also open the country to more foreign investments.

“This is for them (credit rating agencies) to have a better appreciation of the Philippines. We want to constantly engage them into a discussion,” Fernandez explained.


Itinerary of the meetings – including the attendees – is still being finalized, he said.

Boosted by an acceleration of government spending and strong exports, the Philippine economy grew by 5.9 percent in the second quarter, bringing the first semester expansion to 6.1 percent. This is slightly better than the five- to six-percent target for the year.

Sought for comment, Moody’s Assistant Vice President Christian de Guzman said in an e-mail the debt watcher has been monitoring the Philippines closely.

“The Philippine rating is monitored on an ongoing basis and we respond to developments as necessary,” he said.

Philip McNicholas, Fitch director for Asia-Pacific said the second quarter growth was “broadly in line” with its expectations and that it will await further data before making an assessment.

“Fitch does not take rating actions based on a single data point,” McNicholas stressed.

S&P representatives declined to comment.

Fernandez said the government is continuing its dialogue and cooperation with the credit raters.

source: philstar.com

MWC Gets Top Credit Rating

MANILA, Philippines --- Manila Water Company, Inc. (Manila Water) was assigned the highest Corporate Credit Rating of PRS Aaa (Corp.) by Philippine Rating Services Corporation (PhilRatings) as it has a very strong capacity to meet its financial obligations.

PhilRatings said the rating reflects Manila Water’s proactive management and competent technical staff with a proven track record and its efforts to expand its service areas to ensure continued growth.

The rating also took into consideration MWC’s sustained profit performance; and more than adequate liquidity position, financial flexibility and capitalization which can support additional debt.

PhilRatings noted that, throughout its operating history, Manila Water has been able to meet and even surpass its regulatory and financial targets, making efficient use of its capital, accumulated industry experience and partnerships.

The company’s management has also been very proactive in dealing with issues relating to the water industry, such as the development of new water sources.

Manila Water continues to increase its profitability with net income for the period rising by 7 percent from P3.98 billion in 2010 to P4.27 billion last year.

The trend continued in the first quarter of 2012 as net income improved by 64 percent to P1.34 billion, from P816 million for the same period last year.

MWC keeps comfortable levels of cash and short-term investments on hand. This amounted P5.89 billion as of end 2011 and further increased to P6.45 billion as of the end of the first quarter 2012.

The company likewise maintains healthy coverage ratios as EBITDA Interest Cover and Debt Service Coverage Ratio (DSCR) as of end 2011 were at 5.16x and 2.65x, respectively, reflecting Manila Water’s strong capacity to meet its current obligations.

MWC is currently undergoing its third Rate Rebasing period as the Concessionaire of the East Zone. It has already submitted the requirements for the process to the regulators and is expecting feedback within the year.

Given its prior experience with previous Rate Rebasing periods and a historically strong performance vis-à-vis regulatory standards and targets, the process is likely to go smoothly and result in the company’s continued viability and growth in the next five years.

source: mb.com.ph

Big Banks Brace for Credit Rating Downgrades

Moody’s Investors Service has begun notifying some big banks that their credit ratings may get cut as early as this afternoon.

The calls started going on in the last hour or so, according to people briefed on the matter but not authorized to speak on the record. With ratings changes, Moody’s typically reaches out to the banks a few hours before it publicly announces anything, giving them a chance to process the information.

Moody’s, one of that nation’s largest ratings agencies, announced in February that it would assess the credit of 17 global financial companies for potential downgrades, including Goldman Sachs and Bank of America. Morgan Stanley, which was hit hard in the financial crisis, could be the most vulnerable. The agency has warned it could cut the bank’s ratings by three notches, leaving it two levels above junk and below some of its rivals.

Moody’s did not respond to requests for comment. While Moody’s has started notifying the banks for prepare for rating changes this afternoon, the timeline for the agency’s actions is unclear.

A downgrade can have serious implication for a bank’s bottom line, potentially increasing the cost of borrowing and eroding the confidence of customers and lenders. Trading partners may opt to move their business elsewhere.

Shares in the nation’s biggest banks began falling more sharply in early afternoon trading on Thursday, as investors anticipated the potential downgrades.

Five institutions — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — were all down by more than 1 percent. Morgan Stanley was down 1.5 percent. Hardest hit were Bank of America and Citigroup, which had fallen 2.6 percent. JPMorgan was down 1.5 percent, while Goldman was down 2.3 percent.

While Europe remains a pressure point with audits showing that Spanish lenders may need another $78 billion, it was the prospect of action by Moody’s that appeared to be weighing on the bank stocks.

Investors began tweeting about a report by Sky News’s Mark Kleinman this morning, saying that Moody’s was expected to make its long-awaited announcement about bank ratings after the market closed on Thursday.

source: nytimes.com

Things To Consider in Buying a New Car

If you are thinking about buying a new car you are probably considering from where to get a loan. Assuming you live in the United Kingdom and want to take out a car loan, you should consider all the deals available and shop around for the best one. Each loan company has different criteria so you need to consider all of these before making a decision. If you do not plan wisely you may be paying a high rate of interest which could cause financial problems as the United Kingdom is not a cheap place !


These five points may be useful to consider.


Look at the options :
Keep in mind the various choices that are available to you in the UK. There are so many that it makes good sense to take time and effort in choosing the right car loan for your circumstances.

A secured or unsecured loan :
Unsecured loans in the UK are good for car buyers who do not want to have their homes offered as collaterol . or indeed if they have no property to offer anyway. The advantage of unsecured car loans are reasonably low interest rates, currently between 6 - 9%. Also the monthly repayments are more manageable. The disadvantage is that you must have a good credit rating to apply for such a loan.

Choosing a variable or Fixed Rate loan :
Both options have advantages and disadvantages. With a variable rate loan there is a chance of rate increases in the future, however, if the rate goes down, you could benefit financially. Interest rates on fixed loans are constant for the life of the loan, so managing the loan is much easier.

Balloon payments :
The basic thing with Balloon payments is that as you have agreed to pay the full amount at the end of a predetermined month, you have no worries about affording monthly repayments. Advantages of Balloon payments are attractive due to there being no risk involved

Do you approach car finance companies ? :
There are many car finance companies in the UK that offer loans to people whether their credit rating be good or not so good. For people with bad credit ratings this option is a distinct advantage as they are able to buy a car, whereas under other circumstances this would not be possible. However this type of loan is often considered disadvantageous, as such a loan is seen as high risk lending and and consequently carries a high rate of interest.