6.5 Attitudes to credit and debt

Question 1

Ways in which providers are redesigning their credit products to meet the needs of those who can afford to repay:

Answer 1

• Mortgage applicants now have to supply a higher proportion of the property value as a deposit because lenders have reduced LTV ratios
• Loan to income ratios have fallen from people being able to borrow up to six or seven times their annual income to around three of four times
• Minimum repayment on credit cards must comprise all of the interest owing during that month and a small proportion of the underlying debt
• Stricter control over overdrafts

Question 2

What is the typical LTV ratio offered by a bank?

Answer 2

Around 80%

Question 3

What are customers advised to do in regard to credit cards?

Answer 3

• Pay more than the minimum each month

- Limit themselves to one or two cards

Question 4

What happens if someone cannot repay a payday loan?

Answer 4

The interest rate accumulates and fees are added to the core loan