Government to guarantee loans

Article by Online loan, unsecured loans, loans

A new scheme is to be launched in which to encourage banks and building societies to lend to small businesses, in the hope of stimulating economic growth. The Enterprise Finance Guarantee scheme aims to get banks to agree to 1.3 billion pounds worth of loans to small and new businesses.

What the scheme is proposing is that the government will pay 75% of the borrowers’ loan if they default at any time. However currently only a mere 10% of businesses actually even know the scheme exists although they’re already getting applications totalling almost ?30 million a week.

However the scheme isn’t as straight forward as it seems as many who have applied have been deterred as the company directors have to sign to say they are 100% accountable for the loan. The banks still seem unwilling to lend even though the government is offering to cover three-quarters of the cost of the loan should the business default on any payments.

Penalty charges to be cut

It is also suggested that the Office of Fair Trading is seeking to oust penalty charges in which are imposed on people who miss home loan repayments. Currently people who fail to make a payment are hit with excessive administration costs, the OFT are aiming to crack down on this or at least put in place a cap which will help people who are struggling to pay loans and mortgages in this current period of economic downturn.

Currently people are hit with a warning letter which immediately means they incur a £15 admin charge with added costs on top of that, averaging at £55 per month for a missed payment. They have previously capped the cost of credit card charges at £12, more than half the usual ‘fine’ for a missed payment.

It is hoped that these government changes should help both the general public and small businesses alike in which should hopefully stimulate economic growth.

If you are currently looking at the different loans on offer, there are various websites in which can help you find an online loan which will cater for your needs, offering both secured and unsecured loans.