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GE Capital Say Smaller Australian Lenders Still Find Funding Difficult
Non bank financial company GE Capital says raising finance for smaller lenders continues to remain difficult for smaller lenders when compared to the major banks.
Skander Malcolm who runs GE Capital in Australia says that because the banks have large depositor bases they were able to fund raise more effectively than smaller lenders such as GE Money.
“We’re trying to access capital markets, they are accessing capital markets as well. Certainly, it’s a lot easier for them because they have a whole lot of deposits on hand.” Mr. Malcolm told Sky Business News.
Mr. Malcolm added that the European Sovereign Debt Crisis had had an impact on the cost of funding.
“But from our perspective, we’re well funded through this year and into next (year), so we’re pretty comfortable with where we are. But for some of the organisations out there trying to raise funds, it’s not exactly a liquid market, so there are certainly challenges still out there.”
Mr. Malcolm stressed that GE Capital was not aiming to compete with the major lenders, preferring instead to maintain a specialist position.
“When we target specialist segments, particularly in the retail side but also in the commercial side, then we compete successfully. We generate returns that are anywhere between 20 and 40 per cent better than major banks, and that’s because we stick to segments that we know and understand.” he said.
During the global financial crisis GE Capital exited the home and car loan segments, because it was felt that the company would find it tough to fund those loans.
“Our funding requirements are a lot easier now, having made those decisions, We have no plans to move back into mortgage or auto.” Mr. Malcolm said.
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Australian Banks Collect Billions In Fees
Australian banks charged their customers a collective $12.7 billion in fees last financial year, which represents an increase of nine per cent from the previous year, according to new data from the Reserve Bank of Australia.
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Five Tips For Borrowing Using A Personal Loan
Personal loans can be amongst the cheapest way to borrow, but we can’t help but stress how important what the reason you are borrowing the money for.
If you are looking to finance a new flat screen television or go on holiday, or any other luxury, a personal loan is not your best option. Fortunately the financial crisis has made most people more aware of their finances and changed the way they think about borrowing.
More people are saving to buy life’s luxuries, and we are far less reliant on loans and credit for our spending.
If you need the money for something really important, then borrowing through a personal loan, is far cheaper than through the use of a credit card.
Here are five tips for personal loans.
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Nine Credit Card Pitfalls
No matter how responsible you are when it comes to credit cards, they still come with a number of pitfalls. As soon as you navigate your way past one, yet another emerges. Here are 9 credit card pitfalls.
1. The Debt That Never Ends
The minimum payment on many credit cards barely meet the interest being incurred on your debt, which means if you only ever make the minimum, you’re debt will never reduce and seem to be endless. Occasionally a card will be offered with such a low minimum monthly payment, that your debt ends up actually growing.
So if you want to ensure that your debt ends up being a thing of the past, then make sure you make payments well in excess of your minimum monthly payment.
2. Negative Payment Hierarchy
Perhaps the single most important thing when it comes to understanding your credit card debt, is the concept of negative payment hierarchy.
Simply put, when you make a payment towards your debt, the money is used to pay of the debt which is attracting the least interest, whilst the debt that incurs the most interest is left unpaid.
So for example if you have part of a balance on a zero per cent transfer deal, and the rest attracting interest at 18 per cent APR, and you make a $500 payment, thinking you will reduce your debt, well that money goes towards your zero per cent deal, whilst the balance that costs 17 per cent continues to remain unchanged and attracting interest until the full debt is paid off.
The easiest way to avoid this pitfall is to have one card for your balance transfer and a separate card which you use for purchases. That way you can isolate which debt is paid off whenever you make a payment.
3. The Hidden Cost Of Balance Transfers
Balance transfer deals are unquestionably a good way of reducing your overall cost of debt. But they do have hidden costs, for example through NPH a 3 per cent fee for a zero per cent balance transfer might on the face of it seem very reasonable, but might actually mean an APR of 4 to 11 per cent.
If you want to ensure you have a low APR, you should look for longer deals with lower fees. Save your money in an account that pays reasonable interest, and pay the entire balance off at the end of the offer.
4. Balance Transfer Fees Can Cost Interest
When you transfer a balance onto a zero per cent card, the fee is usually added to the balance, but some lenders may class the fee as being a purchase and charge you interest on the fee and because of NPH, the fee will continue to incur interest until the whole balance is cleared.
So make sure you read the fine print, understand the terms of the deal, and kick up a fuss if something like this happens when it shouldn’t.
5. Typical APRs Not Obtainable
Typical APR’s quoted by lenders are only ever offered to customers with the best credit score, and for most people lenders offer APR’s which can often be much higher than the typical APR quoted.
Some lenders may even reject the application outright, and pass the details on to a less than savory lender who will make the loan.
If you have been rejected, then do not take out a product offered by a third party, and make sure you check your credit report for any errors.
6. High Increasing Standard Rates
Even if you manage to obtain the typical APR, they are exorbitant at the best of times, and can average as much as 10 per cent above the cheapest personal loans, and lenders can hike interest rates at will. So always keep your options open, and if you can, balance transfer the debt and take advantage of low interest rates.
7. Calculating APR
Lenders can calculate their interest in different ways, and some estimate that there are as many as 12 different methods, which means APR’s can have very little meaning.
The best way to avoid this is the age old zero per cent balance transfer, but you should also seek to avoid cards which have lots of fees and charges.
8. ‘Cheap’ Monthly Interest
Cheap monthly interest rates are disingenuous. In fact I would go as far as to say they are outright fraudulent. A monthly interest rate of 1.5 per cent might seem like a good deal, but in actual fact it adds up to 19.6 per cent APR, which is far higher than the average rate. So make sure you are not taken in by cheap monthly rates.
9. Credit Limit ‘Rewards’
Some lenders may say they are rewarding you by increasing your credit limit. You should be careful not to see your new limit as a target for spending, and add to your debt burden for no reason.
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Nine More Credit Card Pitfalls
In the first part of this series we looked at nine credit card pitfalls. As we said previously, even for the most responsible users credit cards represent a minefield so here are nine more pitfalls you should be aware of.
1. Over-Priced Protection
Insurance offers that credit cards tend to present are horribly over-priced. You should avoid signing up to these and instead look on the internet for a better deal.
Stand alone insurers offer policies at sometimes even 1/10th the price a credit card charges, and this is true for moth types of fraud or theft insurance that you would normally obtain from your credit card lender.
The law also offers fairly good protection against fraud or theft limiting your exposure fairly heavily.
2. Insurance You Did Not Buy
Some lenders have few misgivings about charging you for insurance you did not actually buy, or even went as far as declining to buy.
If you find this happens to be the case, you should take your application form to your lender and show them as evidence when you lodge a complaint.
3. Small Mistakes Lead To Bigger Mistakes
Missing even one payment deadline is enough to incur a charge. If the late payment was really just an oversight on your part, you should call your lender and appeal the charge. If the appeal fails, you can always switch lenders, but the best way to avoid the problem is establish a direct debit.
4. Don’t Use Your Credit Cards For Withdrawals
Cash withdrawals using your credit card or cash advance attracts hefty fees and is not a cheap way to access or borrow money.
Using your credit card for a withdrawal incurs a fee of 2.5 per cent of the amount withdrawn, and the cash advance itself can have APR’s as high as 25 per cent with no interest fee period.
Do not use your credit card for withdrawing cash.
5. Credit Cards Are Not Cheques
Credit card account cheques are just an expensive method of obtaining cash as credit card withdrawals, with similar upfront fees and APR’s and again no interest free period, so again avoid using them at all costs.
6. The Price Of Rewards
Credit card lenders love to offer rewards to their borrowers, because from their perspective they are a good way to attract new customers and encourage existing customers to spend using their card, which means it is profitable to run a rewards program.
If you sit down and add up the value of the rewards you are receiving, compared to the interest you actually pay, you will more often than not find they do not offer very much value relative to their cost.
7. Admin Fees
Some credit card lenders have the wherewithal to charge you administrative fees for moving home and changing your mailing address with them. If you find this is the case, there may be very little you can do, but you should express your displeasure and kick up a stink. The lender may decide to forgo the fee.
8. Penalties For Being Debt Free
Some lender will charge you a monthly fee for not using your card or incurring debt. Some even charge customers for carrying a positive balance, so you really should watch out for this, its terribly unfair.
You should use your card when buying things on the internet or when making big purchases. They give far more protection than a debit card alone. Just remember to make sure your whole bill is paid.
9. Playing For Time
Credit card lenders are not always consistent with when they send you your statement, sometimes moving it closer to your payment deadline, leaving you less time to make your payment.
The best way to avoid this is to have a direct debit set up, and even better, if you can pay your bill off in full every month, most of the problems can be avoided.
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Money For Nothing – The Chicks Aint Free
If you were to approach the manager of your local branch and ask him or her how to get free credit, the chances are not very high that they will fork over the information so easily.
Of course it is completely possible to borrow money interest free, and we will explain three methods of doing so.
In life when someone offers you something for free, that is usually the signal to start paying attention and find where the catch is. So whilst we seek to let you know how to borrow money for nothing, you should also be aware of the pitfalls associated with each method.
If you do not mind your finances properly, these methods of borrowing can lead you deeper into debt. So do be careful.
If you’ve been hunting through the personal loans section at your bank, you won’t have found these options. In fact, providers don’t label them as ‘loans’ at all!
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Three Tips When Shopping For A Personal Loan
When used properly, personal loans are a great way to meet any funding shortfall that you may have. That is to say, forget about using them to pay for holidays or whatnot.
Funding luxuries are not the best way to use a personal loan. But if you have a genuine need to borrow $10,000, or an amount that a credit card is just not going to cover, then a personal loan is the product for you.
Here are three tips when shopping for a personal loan
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Aussie Home Loans Says It Is Poised To Achieve Dominance In Non Bank Mortgage Lending
John Symond, executive chairman of non bank financial Aussie Home Loans, says his company is poised to achieve dominance in the non bank mortgage lending segment, that, despite the fact that it is widely expected that there may be as many as three further interest rate hikes during 2010.
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Six Financial Mistakes To Be Avoided
If you are making one of these six financial mistakes, you probably aren’t aware, but doing so puts your financial security in jeopardy.
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Four Steps To A Debt Free Life
Australians pay billions of dollars in interest on their debt every day. Instead of letting the banks profit from our debt, all of us should be looking to make our debt burden as cheap as possible. Here are four steps to do that.
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