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MONEY MENTORS: The Big Picture. May: Take action and take control. June/July. March: Prepare for action. House Group in November. Budget mentoring in Dec/ Jan. Money Walk in February . Key Tasks for MONEY MENTOR Leaders.
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MONEY MENTORS: The Big Picture May: Take action and take control June/July March: Prepare for action House Group in November Budget mentoring in Dec/ Jan Money Walk in February Key Tasks for MONEY MENTOR Leaders... 1. Develop a plan to enable and money management to become sustainable in your institution 2. Graduate from Money Mentors Academy 1. Identify deals in your local area that aren’t as good as they would appear. Work with your group to educate and make the right choices
How has the money walk gone? • What worked well? • What could be improved? • What have you learnt?
Aims of the session • Identify and understanding important financial terms associated with borrowing and saving • Distinguish between various types of credit and limitations/advantages of using such credit. • Learn about the range of issues associated with credit and borrowing.
Q1) When may you need to borrow money? Q2) How likely is it that you will ever need to borrow?
Spend more than you otherwise could To bring forward spending To boost future income/Wealth
Average borrowing via credit rose to £4,708 per average UK adult
APR • A simple way to express the cost of borrowing (%) • Takes account of interest and other charges , as well as timing of payments. • As a rule: The higher the APR, the more you pay! Consider…Do you tend to get something for nothing?
Call today, don't delay LoansRus Meriden finance Borrow £1000 20% APR Pay us back £200 every month Borrow £1000 20% APR Pay us back at the end of the year in one lump sum
Variable Vs Fixed A rate of interest that stays the same – usually for a period of time A rate of interest that moves up and down
Credit history • A record of how you have managed your borrowings in the past. • Used by lenders to decide whether to lend to you now, and if so, what interest rate to charge. No way in hell are you getting any money!
Typical Typically 2/3 given @ that interest rate
Financial jargon Financial products Financial services But you can educate yourselves further….
Around the room are 6 different types of financial lenders, services and products. in your groups; you must guess the highest APR rates to the lowest. 1 being the highest, and 6 being the lowest. Please remember that these specific rates featured are purely examples, and may differ from 1 source to another.
Loan shark It is a criminal offence for anyone to lend money without having a licence to do so! Illegal money lenders are often referred to as ‘loan sharks’ because of the rough tactics they use to get money from you.
Loan shark Loan Shark – One illegal money lender was found to be lending at 117,000%!
Pawnbrokers Pawnbrokers are a source of short-term loans, typically used to ease temporary cash flow problems. There are no credit checks because pawnbrokers only provide secured loans. You hand over to the pawnbroker an item against which the loan will be secured. The pawnbroker values the item and determines the maximum loan you can have. Monthly interest is also added to the loan.
Pawnbrokers Pawn direct - the less you borrow, the more you pay. For a loan of £50-500, the APR would be 79.3%
Personal loan with the credit union Credit unions are owned and run by their members, for their members. Some credit unions may lend to you as soon as you become a member. Others will lend to you after you have shown them you are able to save regularly
Personal loan with the credit union Personal loan with the credit union charges a typical interest rate of 13.68%
Bank overdraft The amount borrowed from the bank when you have spent more money than you have in your current account.
Bank overdraft Abbey's current account has a penalty fee of £25 a month if customers go into unauthorised overdraft, with interest on the debt charged at 28.7%
Payday Lender A payday lender provides payday loans - small, short-term loans that are intended to cover a borrower's expenses until his or her next payday.
Payday Lender The Money Shop is currently offering a special offer to pay £9.99 for £100 loan.This is equal to 260.2% APR
Store card A type of credit card, but one which lets you buy things only in a narrow range of shops.
Store card The Miss Selfridge store card charges 30% APR
Lets see some of the highest to smallest rates of interest • Loan Shark – One illegal money lender was found to be lending at 117,000% • The Money Shop is currently offering a special offer to pay £9.99 for £100 loan.This is equal to 260.2% APR
Pawn direct - the less you borrow, the more you pay. For a loan of £50-500, the APR would be 79.3% • The Miss Selfridge store card charges 30% APR • Abbey's current account has a penalty fee of £25 a month if customers go into unauthorised overdraft, with interest on the debt charged at 28.7%
Personal loan with the credit union charges a typical interest rate of 13.68%
Types of borrowing… Store cards Credit cards Overdrafts Personal loans HP Buy now, pay later…
Newspaper clippings (5 mins/review clipping and feedback • Do the newspaper clippings illustrate: • Irresponsible lending • Uninformed borrowing
Creditors and us Irresponsible lending The UK insolvency helpline - “debt from irresponsible lending is widely accepted as one of the main factors for the growing debt problem in the UK” • Increasing credit card limits too easily. • Increasing overdraft limits without authorisation. • Not requesting proof of income. • Credit facilities being offered as • False and Misleading adverting veiling interest rates. • Giving loans and credit cards to those on benefits • “Small print” trickery in long and text heavy credit contracts
Creditors and us Its not all about the creditors – we have a duty too take responsibility too! • Sustainable borrowing – financial planning. • Living within means. • Understanding financial jargon/products/services. • Confidence to question claims and say no! • Type of borrowing. • Keeping up with the joneses!
In May 2008 the reported an 18 year old woman living off state benefits was given £5,000 for a nose job! Income support = £60 a week If Roma was to pay off the loan @ £15 a week it would take just over 333 weeks to pay off/6.2 years This figure doesn’t include the interest rates/if she fell behind… Roma was a single mum living on state benefits and admitted that she didn’t have any savings. When she approached the bank for £4,000 to cover a £3,600 nose job, the bank responded by giving her a loan for £5,000.
…In addition, meet Phil McGrath On the 29th January, 2008 the reported this story • A DESPERATE divorcee is facing eviction after being flogged £42,000 worth of loans from a high street bank - despite living entirely off benefits. “I said I was unemployed, but the lady in the local branch crossed it out and put self-employed," said the 55-year-old. "It was incredibly irresponsible as I had no hope of going into employment."
Financial snap Have a go at pairing the financial term with its related card! Variable A rate of interest that moves up and down =
APR Useful for Comparing loans AER Lets me know the return on my money saved PPI In the event I get sick, this will help me keep up to date with monthly payments, such as a mortgage Capital The overall amount of money saved or invested ISA
Can pay a higher interest rate than a normal savings account Bank account Will help me manage my everyday money Credit Unions Provide savings and loans products for their members. Membership depends on having a common bond Store Card available from some large high-street chains or groups. You must be at least 18 to apply, and is similar to a credit card. Pension Helps you save for retirement
Loan shark Unlicensed to lend money, and often lend at very high rates Mortgage Loan secured against your home. ATM Cash machine Credit history A record of how you have managed your borrowings in the past. Used by lenders to decide when to lend to you and how much Fixed
Forced to pay more Vulnerable to financial loss Denied other products FINANCIAL EXCLUSION Vulnerable to financial shocks Difficulty accessing employment Unable to afford other products
What happens if things go wrong? • Stay informed • Use the correct tools to help you • Communication • Record information • Question and challenge • Referrals/other organisations
APR (Annual percentage rate) = Useful for Comparing loans AER (Annual equivalence rate) = Lets me know the return on my money saved PPI (Payment protection insurance) = In the event I get sick, this will help me keep up to date with monthly payments, such as a mortgage. Capital = The overall amount of money saved or invested ISA (Independent saving account) = Can pay a higher interest rate than a normal savings account Bank account = Will help me manage my everyday money Credit Union = Provide savings and loans products for their members. Membership depends on having a common bond Store card = available from some large high-street chains or groups. You must be at least 18 to apply, and is similar to a credit card. Pension = Helps you save for retirement Loan shark (illegal money lender) = Unlicensed to lend money, and often lend at very high rates Mortgage = Loan secured against your home ATM (Automated teller machine) = Cash machine Credit history = A record of how you have managed your borrowings in the past, used by lenders to decide when to lend to you and how much. Fixed = A rate of interest that stays the same
NEXT STEPS: • Money Walk • Credit and Debt Training • Attend London Citizens’ Day for Civil Society - May 2nd
