| Is debt killing you? Banks begin to offer a helpline
MUMBAI: Anand Sharma (name changed) was in complete mess after having spent around Rs 1.5 lakh on expensive restaurants, pubs and branded clothes. Lured by easy finance, he had borrowed heavily from different banks through credit cards and personal loans. But, as he discovered later, borrowing was the easier part. On a salary of Rs 10,000 per month, it was next to impossible for him to repay the loan. His wife Malini (name changed) didnt have a clue to what was happening. She was busy mothering their three-year-old kid and managing the house. But the day she discovered her husband fretting about his bills and excess debt, she decided enough was enough. Malini had heard from a friend about a debt counselling centre by the name of Abhay and decided to go there for help.
Credit Card Climate Change May Come Too Late
There's a saying among professional money managers that goes something like this: "Managing what you owe is just as important as managing what you own." To that I would add "because if you don't, you're liable to end up not owning anything at all." This also happens to be the theme of a controversial new film called "Maxed Out," a documentary that has been creating a lot of buzz lately, similar to last year's "An Inconvenient Truth." Instead of global warming, the threat this time involves a spending-addicted middle class America getting buried under a mountain of credit card debt. Entertainment Weekly called it "the scariest horror film of the season." The movie portrays banks and credit-card companies as financial predators who prey on middle- and low-income Americans, luring them with cash-back rewards, frequent flyer points, and low initial interest rates, and then sucking them dry once those low come-on interest rates rocket into the kind of double digits only a loan shark can love.
RISE OF THE HALF MILLION POUND MORTGAGE
Affluent homeowners who take advantage of lenders' very high income multiple offers must take a long hard look into the future to avoid risking it all, advises broker My Mortgage Direct... My Mortgage Direct joint director Cath Hearnden: "A young professional couple earning a joint income of 100,000 could certainly borrow enough - 500k is not unusual these days - to buy a very desirable property, but should their income drop for any reason things could fall apart very quickly," said Hearnden. "Some couples starting a family may take a career break or have to fund child care which could take a large slice of income. "The relentless rise of property values has led to lenders upping the amount they are prepared to offer to well-off borrowers who can prove they can manage the repayments,but people's lives change and they need to fully appreciate the level of financial risk these deals carry." As average borrowing for new homeowners reaches a record level of 3.31 times annual income, according to the Council of Mortgage Lenders, lenders face increasing levels of criticism for allowing borrowers to overstretch themselves.
Borrowers and lenders share blame
Many in Congress have declared the growing number of foreclosures a crisis -- one that government needs to address, although no one is clear on what it is government should do. Those of us who live in Indiana, and Tippecanoe County in particular, may have a hard time understanding why so many people across the country were surprised when housing markets -- new and existing homes -- turned down after interest rates went up. Did people really think that housing prices would continue to increase by double-digit percentages forever? Did people really think that adjustable mortgages -- or teaser rates -- would never be adjusted? Did people really believe that lax financing policies -- in some ways encouraged by the federal government as a means to increase home ownership -- wouldn't lead to more home foreclosures? As a region that has been struggling with stagnant housing prices for more than five years, Tippecanoe County perhaps understands better than most the financial problems families face.
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