Credit crunch? Bank are throwing loans away

Praise the Lord, I’m in the money. The pity is that it’s not actually mine; it’s my banks. They won’t stop throwing it at me, despite my protestations. But, wait a minute, aren’t we supposed to be in the throes of a credit crunch?

That’s the problem, you see, we are. So much so that banks are falling over each other to seduce High Street customers with great savings rates. They’re also keen to sever off any dead limbs, such as those customers that borrow money but always pay it back on time, robbing them of much-needed interest in the process. Could Egg please stand up?

But as they push these hapless customers away, they are just as keen to grab hold of another type and press them to their bosom: the borrowers that take on debt and can handle it, but only just.

That’s why I constantly got loan offers and unsought-after overdraft increases pushed through my letter box. I’m one of those people who spends like crazy, racks up debt, pays my due in interest charges, gets scared and then lives frugally for a time to pay it all off.

Banks like people like me now more than ever, mainly because we’re money-earners; they can lend to us, make a killing, but suffer little risk because we always come good.

Happy days all round? Not exactly. Anyone would be a fool to take advantage of many ‘deals’ now being offered by banks to some customers. They’re an expensive sweetner aimed at sugar-addicts who are liable to go on an all-out binge and line the chocolatier’s pockets in the process (we’re still talking about debt here).

For example, I have a modest overdraft with NatWest which is pushed to the limit at Christmas and when holidaying, but is always reigned back in. I have practically no credit card debt. As a result, I receive regular overdraft increases completely out of the blue that are absurd relative to my income.

I have now got an overdraft limit of over £5,000 which, at an interest rate of 19.41%, I will never use. Add to this offers of £10,000 loans over five years at a rate of 10.4% which, I must remind myself, I do not need and will pay £6,400 in interest for the privilege.

For the bank though, the offer makes complete sense because it’s all about making money.

Similarly, a colleague recently received a letter from Barclays offering secured loans of £15,000-100,000. It said it would waiver the £995 arrangement fee if they took up the deal before May 20, but this ‘deal’ was presented in terms of low monthly payments, not the total amount repaid.

A loan of £15,000 at a monthly rate of £155.22 over 300 months (these were the figures quoted) amounts to a total repayment of £34,566 (not quoted). The £100,000 would result in a repayment of £230,433 over the same period.
Why not look into remortgaging instead? And is encouraging people into ludicrous loans over 25 years now considered responsible lending?

I suppose the catch-cry of the banking industry is that it is just fine as long as the person can afford to make the repayments.

There’s also the credit crunch; banks need the money, and everyone needs them to stay afloat.

After all, the end justifies the means. Doesn’t it?