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Problems banking with bad credit

Finding a bank account when you have bad credit isn’t always straightforward. Depending on what kind of problems there are on your credit report, you might find your choices are restricted since most bank accounts simply aren’t available to you.

There are always basic bank accounts, of course, also known as bad credit bank accounts. They’re open to a much wider range of people, since they can be opened by those who have a bad credit rating. They don’t offer overdrafts, but do supply the most important ‘basic’ elements of banking – such as somewhere safe to keep your money, somewhere to have your income paid in, access to cash machines and access to Direct Debits.

In other words, a credit bank account can give someone with bad credit a way to stay on top of their finances, get access to better deals (i.e. Direct Debit discounts) and enjoy the other ‘essentials’ of modern-day life.

However, for some people it’s hard to find a credit bank account that’s open to them. Undischarged bankrupts are a clear example: only two high street banks provide basic bank accounts that are open to undischarged bankrupts. This can be a real problem – and the UK Government has recognised this.

Business Minister Edward Davey has described a bank account as an “essential stepping-stone” to help people get their finances back on track after they’ve run into problems with their money.

“Without access to a bank account, he said, “even the simplest financial transaction is beyond reach for an undischarged bankrupt. What I want to see are financially capable consumers who are able to effectively manage their money and make the fresh start they need.”

It’s a real issue for a lot of people. Bankruptcy tends to last a year before the individual is discharged – so how many individuals are we talking about? Throughout the UK, over 72,000 people entered bankruptcy in 2010 alone.

So it’s good to see that the Government’s taking this very seriously – and that The Insolvency Service has launched a consultation that’ll look into the problem and see what could be done to improve things for undischarged bankrupts looking for a bank account.

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Categories: Finance

What is APR?

Annual percentage rate or APR as its often referred too is a calculation intended to allow consumers to benchmark the cost of borrowing. There are many other factors to be considered but generally speaking the lower the APR the better.

APR is worked out by looking at the amount of interest you have to pay and the cost of any other fees. APR also looks at the effect of how often interest charges must be paid and takes that into consideration.

The monthly interest rates often advertised are not the same as APR because they don’t include all fees so make sure you compare like for like when shopping around for the best deal. Comparing an APR with an advertised interest rate can mislead you about which is the better deal.

The APR is often based on the perceived risk of the lender, so anybody with bad credit history may end up having to pay a higher APR. The APR on secured loans is affected by the amount your borrowing in comparison to the value of the home its secured against.

The loan calculator and lending tables can help you check out how the APR effects the repayment of debts.

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