The risks to personal financial security associated with the recent credit crunch are extending beyond the sub-prime market to affect other borrowers, it is claimed.
Personal finance site Fool has stated that many people believe only buy-to-let investors, first-time buyers and those with previous adverse credit histories are likely to feel the squeeze as a result of tightening lending criteria. However, the company states that anyone whose finances contravene set thresholds could also be at risk - damaging their chances of taking out a mortgage, a credit card or personal loans.
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The company reveals that, in the light of the Bank of England's latest report on UK financial stability, the economy remains at risk from turmoil in the global financial markets. And while the mortgage sector may be showing the signs of recovery, lenders continue to tighten their criteria when considering providing loans to high-risk borrowers.
According to the firm, two groups in particular may find that their previous borrowing closes off future lending prospects. The Bank of England identified those whose debt repayments exceed 55 per cent of their household income and with net worth less than 33 per cent of their income as potentially dangerous to lend to.
David Kuo, head of personal finance at Fool, says: "The two thresholds provide a handy guide for consumers to see if they are sitting ducks. And by ensuring that we stay comfortably within them, we should be better placed to face unexpected shocks.
"Consumers should draw up a statement of affairs immediately to get a useful snapshot of their finances. The snapshot will tell, at a glance, whether you fall into one of the 'at risk' categories."
While making sure they have a stable understanding of their financial affairs, consumers might also like to consider debt consolidation loans as a means of fixing their debt in a single monthly payment. Such financial planning can help to reduce the complexity involved in paying off debts and potentially be helpful in clearing debt faster.
However, establishing a full understanding of how the financial land lies should not be underestimated, Mr Kuo believes: "Failing to draw up a statement of affairs in the current difficult financial climate is tantamount to driving a car without shock absorbers. It may get you from A to B, if you're lucky, but the ride won't be nearly as comfortable as one that has."
The lack of awareness among the British public about the looming credit crunch is highlighted by a personal credit index survey conducted by CreditExpert last week. While revealing that 70 per cent of mortgage holders did not understand the impact of a 0.5 per cent interest rate rise on an interest-only mortgage, the firm also found that consumer credit confidence has risen by two points in the last quarter - suggesting people are less concerned about their borrowing and might be less interested in debt consolidation loans.
In August, the potential for a borrowing crisis in the UK was highlighted by advisory firm Grant Thornton which revealed that the current debt burden outstrips the national gross domestic product.
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