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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Business felt most of the burden of the growth in fees, with banks earnings from the sector growing a whopping 20 per cent to almost $2.2 billion despite flat corporate lending growth.

The business sector bore the brunt of the growth in charges, with fee income from that sector leaping 20 per cent to almost $2.2 billion – despite flat corporate lending growth.

A lot of the increase in fees charged to businesses was driven by fees on existing loans, as lenders re-priced their loan books to accommodate higher funding costs the central bank says.

The RBA said businesses that used only part of their loan facilities were the hardest hit.

“Fees on undrawn loan facilities appear to have risen significantly,” the RBA said.

According to the RBA, households paid $5 billion in fees during the last financial year, representing an increase of 3 per cent on the previous year. Fees charged on mortgages and personal loans were the primary driver for the increase.

Fees charged on mortgages leapt 17 per cent to $1.235 billion as borrowers refinanced their loans and switched from fixed to variable rate loans whilst interest rates were falling last year.

Fee income derived from personal lending to households rose 14 per cent, whilst fees earned from unsecured credit card lending increased by eight per cent.

84 per cent of all exception fees levied was paid by households, or almost $1 billion, a figure which was unchanged from the previous year as exception fees on home loans fell by six per cent.

This was offset by a 13 per cent rise for exception fees on personal loans and a 10 per cent increase on credit card fees.

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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.

1. What are your options?

Before starting the whole application process for a loan, you should check whether you have any cheaper options available for borrowing the money.

There are a couple of things you should think about first before borrowing from a bank, You should work out how much cash you really need, whether you can save the amount, and whether you can borrow the money you need from friends or family.

An easy way to borrow cheaply, is to use your credit card and for a small fee transfer the debt to a new zero per cent balance transfer card. For the introductory period, you will not have to pay any interest, but when that expires the amount can start racking up hefty interest, so you should be careful to make sure you know when the period expires, and set up a strategy to ensure you don’t exceed the period, whether that means transferring any balance remaining to a new card or having paid the amount off depends on you.

2. Check your credit rating

If you find that your only option happens to be a loan and have started shopping for one already, you should know that the “typical” low rates aren’t actually offered to everyone.

Lenders who advertise such rates, are not obliged by law to offer those rates to everyone and unsurprisingly only tend to offer them to a small percentage of their customers, who tend to have near perfect credit ratings.

If you don’t happen to have a perfect or near perfect credit history, then you have a very low chance of being offered the best rates in the market. Lenders will either turn you down or offer you the loan at a higher rate.

You should also be acutely aware that how often you apply for loans is noted by borrowers, and if they get a sense that you have tried to borrow money many times in a short period of time, that starts to send alarm bells ringing.

So make sure you apply for a credit report and have an idea of how clean your record is, before starting the application process for a loan.

3. Compare the TARs

Whenever you shop for a loan you should take your time and look for the best deal, as you would do for any other product.

Whilst many of you are familiar with the Annual Percentage Rate (APR), which is the rough rate of interest you pay annually for a loan, you should also be aware of the lesser known TAR.

TAR stands for Total Amount Repayable, and is an accurate indicator of how much the loan actually costs, and sometimes when you find out the true cost of a loan, it can be quite an eye opening experience.

Always check the TAR when comparing different loans with one another; it is the best way to ensure you are getting the best deal available to you.

4. Avoid secured loans!

Personal loans tend to be what is known as unsecured loans, that is to say they are not backed up by collateral. This differs with the secured loan which is backed by collateral such as your car or house.

Secured loans often seem to be cheaper than unsecured loans, but before jumping in, you should be aware that they often come with variable rates of interest. This means you run the risk of having your interest payments spike into something that becomes unaffordable.

They can make sense, but you should be careful to understand what the trend in interest rates happen to be, and whether you run the risk of them spiking before you have paid off the debt.

5. Minimise your term

The best way to keep the cost of a personal loan down is to pick the shortest term you can possibly manage. Doing this ensures you pay the least amount in interest rate charges. Taking a look at the numbers as an illustration. The rule is the shorter you borrow money for, the less interest is charged.

Finally, after investigating TARs you’ve undoubtedly been suitably shocked at how much your seemingly cheap personal loan will cost. Assuming you borrowed $ 3000 at 7.9% APR

Paying back a $3k loan over 5 years would mean a total repayment of $3,641 – $641 obviously being interest.

Repay it over 3 years and it would cost $379 in interest saving $262.

And over 2 years it would cost you just $253 in interest, saving another $126.

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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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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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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!

1.) An interest-free overdraft

A lot of current accounts these days come attaches with 0% interest overdraft facilities attached to the account. The amount one can borrow varies from account type to lender, but can be as much as $5000.

The major drawback with this is that 0% is usually an introductory offer aimed at attracting new customers, and usually not applicable after the first twelve months. After a year lenders will usually charge some kind of usage fee.

Obviously your overdraft limit will be determined by your credit rating, and the length of time you can borrow money is dependent on the account.

Overdrafts are not a long term way of borrowing money, and after the introductory period expires, usually they attract substantial interest rates on the amount you are overdrawn.

What to watch out for: It’s extremely important you never exceed the 0% overdraft limit. If you fail to obey the limit you will be pushed into an ‘unauthorised’ overdraft – on which you’ll be charged horrendous rates of interest (typically 20-30% APR).

2.) A 0% on purchases credit card

The second method of obtaining free credit is to apply for a credit card which has an introductory 0% offer for all new purchases.

Obviously the lender will indicate what your credit limit is, even before you apply for the card, and will depend on your financial circumstances.

The interest free period depends on the credit card, usually the longest period you can borrow interest free on a credit card is a year, so clearly this type of borrowing is also not long term.
When the 0% deal ends, a very high level of interest on your remaining balance will be charged (typically 15-20+% APR) – so it is extremely important that you clear your balance before this happens.

If for whatever reason a balance remains, then you should seek out 0% balance transfer deals, and transfer whatever debt remains to the new card.

Transferring an outstanding balance tro a new card is not as easy as it used to be. In the post financial crisis world, lenders have tightened their standards, and it is not always guaranteed you will be given a deal.

You also need to make the minimum repayment every month. If you make it late or default on a payment, you may well be fined, and your 0% deal is likely to be taken away from you.

3) A 0% on balance transfers credit card

The balance transfer to a 0% card is the most common advice given to people who want to reduce their interest payments or borrow money for nothing.
God we have given it here many many times already.

The basic premise is if you have borrowed money already using a credit card, you can turn the debt into an interest free loan by shifting it to cards which offer 0% interest on balance transfer.
The amount you can shift will largely depend on your card issuer, credit rating and salary, and you will be given a limit before the card is issued.

Some balance transfer deals can last as long as 15 months, but as soon as the introductory offer ends, you will be paying very normal credit card APR’s.

The vast majority of balance transfer credit cards charge transfer fees (typically 2-3% of the total debt) to move your money onto them.

If you don’t manage to clear your debt during the 0% period, you’ll be saddled with big interest charges.

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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

1 Make Sure A loan Is The Right Option

If you’re financial need is less than $5000, then a personal loan is not the way to go.

For small sums of money, then credit cards are likely to be your best bet. There are a couple of ways you can finance using a credit card. The first is using a zero per cent purchase card, or alternatively you can spend the money on an existing credit card, and transfer the debt to a zero percent balance transfer card, and that will enable you to money for a small fee and pay no interest.

2 Compare the TARs

When shopping for a loan, the Annual Percentage Rate (APR) is not the only thing you should be looking at, and you should also take not of the Total Amount Repayable or TAR.

Knowing what your TAR is on an amount your borrow is the best way of being 100 per cent certain how much the loan is going to cost and what you need to pay over the lifetime of the loan.

The TAR incorporates any interest payable as well as non option fees incurred. So really it is the best measure of understanding how expensive the loan is, and an invaluable tool when trying to compare deals.

3 Keep It Short And Sweet

When you do need to borrow money, it is important to borrow as little cash as you can possibly manage, and do so over as short a time as is humanely possible. Doing that will ensure you keep your interest costs as low as they can be.

Borrowing more than you need has absolutely no utility, and it is likely you will end up spending the loan on something you don’t need resulting in you carrying debt for longer than you have to, and paying more for the privilege than you need to.

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In an interview with Sky Business Channel, Mr. Symond said non bank finance continued to remain fragments, but that Aussie Home Loans was no diversified enough to emerge as one of the largest players in the sector.

“My aim with Aussie is to become one of the biggest retailers of financial services outside of the big banks because consumers need a safe alternative . . . when we see St George and Bankwest taken up, and Suncorp struggling, Hopefully, Aussie can fill some of that void.” he said.

In August 2008 Australian banking major Commonwealth Bank of Australia acquired one third of Aussie Home Loans, and the company now sells credit cards, personal loans and insurance products.

Mr. Symond says that the Australian central bank, the Reserve Bank of Australia, was doing a “pretty good” but has to walk a fine line between balancing the need to prevent the economy overheating, without causing a contraction.

“The housing market continues to perform extremely well, and maybe a bit too well,” he said.

Mr. Symond’s view contradicts results the results of a survey conducted by Australian Finance Group, which says first time mortgages declined by nearly half during January.

According to the mortgage broker, three consecutive interest rate rise, rolling back of Federal subsidies, and the disappearance of first time buyers has take its toll on the market.

“People are not moving or upgrading their family homes, they’ve slammed the brakes on borrowing,” AFG managing director Brett McKeon said.

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1. Paying off your mortgage with your credit card

Paying off your mortgage with a credit card is something that should be avoided at all costs. In the immediate term, you may not be paying more interest, but in the long term your interest payments will balloon, and do so very quickly.

This is because most mortgages cost between 3 to 6 percent in annual interest whilst credit cards charge anywhere between 15 per cent and some even charge more the 30 per cent.

Instead of using your credit card to pay the mortgage you would be better off asking your lender for a payment holiday, and allow the interest accrued to build up. This is far cheaper than other forms of borrowing.

Those people who resort to using a credit card to pay off their monthly mortgage are clearly indicating they are in financial trouble, and goes to show they are having difficulty because they are unable to pay off their most important monthly bill.

Not getting that particular house in order will ensure the individual’s debt problem with spiral out of control.

2. You end every month in the red

The most obvious sign of financial ill health is if you find yourself being overdrawn by the time pay day arrives.

If this is happening to you, then it is a clear signal that you are spending too much.

Overdrafts, especially of the type that have not been approved by your lender is one mof the most expensive ways one can borrow money.

The quickest solution is drawing up a budget and eliminate unnecessary expenditure. Ideally, you should also seek to find a way to generate more income.

3. You don’t know how much you owe

It is extremely dangerous to not know how much debt you are in, particularly if that debt is carried on credit cards.

Card issuers allow their borrowers to pay off a fraction of their loan, and this is particularly worrying because by simply making the minimum monthly payment the borrower allows high levels of interest to build on the amount left unpaid.

Also credit card companies are more often now cutting the credit limit of their borrowers, or they could require you to pay a higher minimum every month which could end up being problematic.

If you are in this position, gather up all your credit card statements, and calculate your total debt, and start working out how to get yourself back into the black.

4. You don’t have a rainy-day fund

Being able to comfortably live of your income without having to get into debt is an excellent start, but one should always endeavour to have some spare cash just in case.

Ideally most experts recommend that we should have 3 months equivalent of rainy day fund tucked away, which will help should you ever be made redundant.

Make sure the money is in an instant-access account, earning a decent rate in interest – the best pay over 3%.

If you want to establish a rainy day fund, they putting aside a quarter of your money every month for a year will go a long way towards to goal of having three months income as cash by the end of year.

5. Your income is not protected

Thinking about the bad things that could possible happen, such as job loss or sickness is unpleasant, and it is no wonder there very few of us actually do it.

If you have a family who depends on your earnings, then you have an obligation to ensure that your income does not suddenly dry up, if the worst should happen.

Insurance is one way of protecting your income. Income protection policies give you the ability to choose how much income you will receive and for how long if you find yourself in a position where you cannot work. The higher and longer the protection the more it costs to insure.

6. You don’t have a pension

The most important financial advice out there is the earlier you start planning for retirement, the more you will have at retirement, and you should start saving for this period of lie as early as possible.

Even if you can’t make large payments into a pension fund, whatever money you do manage to put into a fund will have longer to grow the earlier you start.

Relying on any property you own to fund your retirement, is not completely guaranteed either, if the property market is down when you need the cash, you will end up in a worse position when you need the money than expected.

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1. Set A Goal

Obviously we would all love to be out of debt and in the clear, sooner, rather than later. The first step towards a debt free life is the stated goal of destroying your debt.

There are a number of really simple things that can be done to achieve that goal such as budgeting your expenses and keeping a diary of your spending habits. Both of which will enable you to calculate where your money is going and how much if any, spare cash you can generate to attack your debt load, once your monthly living expenses have been met.

2. Move Your Debt To A Zero Percent Card

It is not the most revolutionary new advice, but moving your credit card debt on to another card and taking advantage of a zero per cent balance transfer deal is really one of the best ways of getting on top of your debt.

Once you get to the end of the zero per cent period, you should be ready to move whatever balance you did not manage to clear, to another zero per cent card, before the higher APR comes into effect.

3. Reduce Your Overdraft Interest Charges

Borrowing on an overdraft can be a difficult habit to break, especially when the finances are stretched. If you find yourself having to dip into an overdraft regularly, why not try and reduce your interest bill by switching to a current account that offers lower interest rates.

Many banks offer lower or ever zero per cent overdraft facilities for the first year, so long as you are making regular payments into your bank account. These offers are only introductory, so you should be aware that once the offer period is up, you will have to make regular interest payments, so you should make every effort to get back into the black as soon as possible.

4. Get Advice

Prior to the credit crunch, lenders seemed very happy to hand out credit as if it were sweets. It is therefore not that much of a surprise that some people carry a little more debt than they are comfortable with.

If you find that you are in over your head, there are a number of free debt counselling services, where you can get advice and you can do it for free.

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