Karl Pemberton: Please avoid overspending this Christmas at all costs (From The Northern Echo)

Karl Pemberton: Please avoid overspending this Christmas at all costs

8:17am Friday 12th December 2008 in Search

FAMILIES have probably never had Christmas better than they had over the past five to ten years, especially with the modern child now expecting an Xbox, Wii or latest item that costs the earth.

This has not been a problem in the past because families would happily spend on their credit cards and then pay them off with a loan of sorts in January when the bills arrive.

But I would advise everyone not to take that gamble this year.

This time last year, mortgages and secured loans were still available up to, and sometimes over 100 per cent of the value of your property. In a rising housing market, this was never a problem and debts could be restructured. Criteria for personal loans and 0 per cent balance transfers on credit cards were also quite relaxed and were a great alternative for people with no or little equity.

But the problem we now face is that those institutions happy to lend us more money are making it harder and harder for the man on the street. Criteria has changed and even the “cleanest client”

cannot be guaranteed. The amount you may be able to borrow is reduced.

Don’t get me wrong, there are still lots of attractive offers available and lenders are very cute at promoting headline rates. However, they may not apply to you after you have spent the money.

Although the headline Bank of England base rate has reduced significantly, unsecured borrowing rates have gone up, with personal loan rates now averaging 14 to 15 per cent. This was nearer nine to ten per cent not so long ago.

Should you find yourself in a position of difficulty, seek advice. Only one missed payment can be the difference between being accepted for credit or not.

There are many agencies available to help, including the Citizens Advice Bureau and Insolvency Practitioners. There are also lots of unscrupulous individuals, so check credentials with a respective regulatory body, such as The Financial Services Authority.

Think twice about spending money you do not have, because this will be the first Christmas in a long time when you may have to face the reality of a January without a “bail-out” option.

■ Karl Pemberton is director of Guisboroughbased Active Financial Services. He can be contacted on 01287-632367 or through activefinan cialservices.co.uk and will be answering readers’ financial questions in a bi-weekly column. Any topics you would like to see featured in his column should be sent to echobusiness@nne. co. uk The information contained in this response should not be relied upon as general advice and is for general information only. We always recommend you seek independent financial advice before embarking on any financial decisions.