Business Economics Finance

Introduction

With the rise in recent years of Secured Loans or Second Charge mortgages the market has grown both in the volume of loans processed and the number of organisations involved. This article will attempt to break down the market into its individual components and explain, in general, the organisations that make up the Secured Loans Market.

The article is aimed at people involved in the finance sector but will probably prove interesting to those taking out a Secured Loans or to anyone with a general interest in how the wheels of the UK finance industry work.

Secured Loan Lenders

Despite there seeming to be masses of organisations in the media willing to lend money for a Secured Loan or Second charge mortgage there are very few players who actually lend the money. This is because a Secured Loan is considered middle to high risk so there are very few organisations actually willing to underwrite the risk. Although there are only a handful of banks actually putting up the money, you will find that they may also use further downstream organisations to underwrite their own risk. For example, The London Mortgage Company, which now trades under the name London Personal Loans, says it uses up to thirty specialists to underwrite the loans it takes on. In recent years with a fairly stable housing market and strong confidence that there will be no sudden drop in prices there are a few more organisations willing to make the leap into secured loan lending, but the number still remains quite small. It is interesting that in most cases the ‘banks’ that take on the second charge debt are not well known organisations. This is because most of them are not customer facing, but sit behind a myriad of intermediaries, but it is similarly interesting that some well know high street banks also take on the debt, but for various reasons outlined later in this document, they sit behind various brand names or tiered organisations so that, in the end the Customer hasn’t got a clue who they are actually dealing with.

So if there are so few players actually lending the money, then why are we presented with masses of organisations offering Secured Loans? The reasons for this are multi-fold. To give some examples it is down to branding and marketing, due to core competencies (i.e. whether Secured Loans are part of a core business or incidental) and it is also in part due to the different types of media (e.g. television, internet, newspaper and radio) Secured Loans are sold. We will outline these reasons and some others later in the document.

Secured Loan Market Infrastructure

In the main, the infrastructure of the secured loans market is quite confusing. In a simple world it would be made up of banks lending the money directly to the Customer, but in the secured loan world there are several other levels of organisations we need to discuss. Firstly, there are the Brokers - these are organisations that supposedly approach various lenders to get the potential borrower the best deal.

Secondly, there are Packagers - although there is no hard and fast definition of Packager they are typically organisations that process loan applications and pass them on either directly to the lender or to upstream brokers. Thirdly there are introducers - these are people or organisations that point Customers to a particular Broker or variety of Brokers. For clarity we will look at each one in turn.

Secured Loan Brokers

As the name implies Broker’s have a ‘database’ of Secured Loan providers that they use to match the Customer’s requirements against to ‘broker’ the best deal. Brokers use a multitude of different methods to attract Customers. For example, some Brokers concentrate on running a team of Introducers (see below) to obtain Customers. Other Brokers concentrate solely on newspaper, television and radio advertising and other Brokers focus on the Internet to get their business. Some of the larger Brokers use all the mediums at hand to get business.

What is quite interesting is how the Broker’s use differing marketing techniques to make sure that they get coverage of the diversities of the marketplace. For example, the officious sounding Central Capital (which in turn is part of Central Trust) uses the brand name Debtbusterloans for its consumer loans business. In a similar vein Barclays uses the name Firstplus for its Internet and Television campaigns. One wonders whether the Financial Journalist Martin Lewis who led a campaign criticising Firstplus for using celebrities like Carol Vorderman to promote their loans knew he was actually criticising Barclays. Other interesting names to mention are the masses of trading names used by General Electric. General Electric operates GE Capital Bank that trades under a number of names including GE Finance, GEMoney, First National and Igroup and some of these are umbrellas to other trading names. It is interesting to note that one overall owner of a Financial Group may be directly related to perhaps 50 or so websites and trading names on the Internet.

Maybe the trading names are not only used to attract the various socio economic groups but are also used to distance Companies from the rather emotive Secured Loans market. When a Customer is asked whom they got their Secured Loan off, they would nearly always say the brand name rather than the name of the Company at the top of the pyramid who supplied the actual loan

It is interesting to note that nearly all Brokers aren’t impartial. The Lenders providing the money at the end of the chain offer them volume overrides (bonuses) if they obtain a particular volume of business over a given period. But contrary to this, it is also noteworthy to recognise that given the relatively low number of moneylenders at the end of the chain the affect on the end Customer is minimal. When a Broker says they are processing an application against Hundreds of Loans, what they actually mean is that they are matching the Loan against various configurations of the same three or four loans. For example - with County Court Judgements/without, of a particular age group/of another age group, for a particular value/ for other values.

Secured Loan Packager

Although the term Secured Loan Packager is used very loosely and there is no clear definition, a Packager is simply an organisation who ‘packages’ up a loan application and passes it onto either a Broker or the downstream lender. So in essence the Packager fills out the forms on behalf of the other organisations. In some cases this operates in a sort of outsource relationship between the Broker and the Packager and in other cases the Packager also has their own team of Introducers (see below) who they package up further loan applications for. I guess the reason for this is that seeing as they have the infrastructure in place they can increase their own organisations turnover and, hence, profitability by employing their own Introducer Network.

Secured Loan Introducers

Secured Loan Introducers are employed by Packagers, Brokers and indeed, in some cases the actual lenders to get further business. An Introducer may simply be a local person who gets business by word of mouth, or they could be an organisation (like a Double Glazing company) that passes on a Customer to a particular Broker. In some cases the Introducer companies are reasonably large organisations in their own right and might have a complete network of physical Introducers, a large Broker/Lender panel and a whole host of Internet websites and brand names.

Conclusion

The Secured Loan Market contains a complete myriad of organisations and as the market grows it is certain to become even more puzzling. What is even more confusing to the onlooker is that there is a lot of grey areas in relationships between the businesses within the hierarchy. For example, a broker may do their own packaging or an Introducer may have relationships with many Brokers making them in effect a Broker of Brokers. But the interesting thing is that no matter what level of the hierarchy the end Customer gives their business to they are highly unlikely to be charged any differently - the only things affected within this instance are the individual profits at each level of the pyramid.

Written by Adrian Hudson from we-introduce-you.co.uk/” target=”_blank we-introduce-you.co.uk

Adrian is the Chief Cook and Bottle Washer of We Introduce You. We Introduce You is a new venture from the I.T consultancy business Sprint Soft Ltd. Adrian writes a journal about the world of finance and his personal life at we-introduce-you.co.uk/theintroducer we-introduce-you.co.uk/theintroducer

Most of my colleagues and friends sometimes discuss about salary when we meet. We talk about raises, what should be the % of raise in annual appraisals, when you shift company or even you are given addition responsibility etc.

They ask me what is the appropriate monthly income one should get. Wow! A question, I guess this has no correct answer. Well, I would say it depends on what ones needs are.

People brag about current salary and how they are satisfied with their current jobs. How they get 30-40% raise during annual appraisals and organization shift overs. Beware, there is a limit your salary can go to during these raises. Soon, it will reach a stage where such raises will not have a substantial effect on your salary packages.

This is year 2006. If you think your current job or current income generator is able to generate 100,000 Rs by the year 2020, then you don’t need to do anything else. I would say “You are well off”. If not, then you should start thinking about ways to generate income.

This is the reason why you need 100,000 (One Hundred Thousand).

Years - Corresponding amount per month for average living.

Year 1940 - Rs 10

Year 1960 - Rs 100

Year 1980 - Rs 1000

Year 2000 - Rs 10000

Year 2020 - Rs 100,000

Note the pattern, just a 0 (zero) is being added to the end after every 20 years. That’s a pattern being followed for last 60 years. Therefore, in year 2020 you will need Rs 100,000 for an average living, whether you agree or disagree.

This is year 2006, so in line with the pattern an individual with income around Rs 25,000 is well off to some extent now.

Times running up fast. Sit back and think.

Will your current income generator give you 100,000?

Cheriyan Thankachen

My Blog:
educatedminds.blogspot.com educatedminds.blogspot.com

This article may upset some people. Money can be a touchy subject, even when talking about giving to poor people. When you combine the subject of money with religious feelings, there can be conflict.

I saw a commercial on television that really bothered me and I wondered why it was so disturbing to me. Perhaps you’ve seen it, or similar commercials, or even heard a message like that from a pulpit. I finally figured out what was upsetting me.

The message was intended to make me feel guilty if I didn’t give money to help poor people. Now I am in highly in favor of helping people, but let’s stop for just a minute to consider those living in poverty.

First of all, God never intended for human beings to live in poverty. The very first recorded words in the Bible from God to man were, “Be fruitful.” It was not, and still is not the will of God for people to be poor and have lack. Secondly, Jesus Christ said that the poor will always be here. So, any talk of eliminating poverty from the face of the earth is to say that Jesus lied.

Now there are people all over the world in need of help. No one can deny that. But why do some religious people try to make you feel guilty if you don’t give to help the needy? That is a violation of the principle of giving. The Bible says that we ought to give, not grudgingly or of necessity, because God loves a cheerful giver. You cannot give cheerfully if you are made to feel guilty about it.

In my opinion, making someone feel guilty so that they will give you their money is stealing. Your feelings are being manipulated; you are being forced to give your money. Thievery!

And have you ever wondered why is there so little preached about the benefits of giving? God has promised that as you give, He will fill your barns or storehouses with plenty. He has promised that you would have abundance. He has even promised that He would open to you the windows of heaven and that He would pour you out a blessing that you would not even be able to receive! The principle that God set up is that of giving, and receiving.

When was the last time you heard someone ask for money and also remind you of the blessings that you should expect to receive back? Rare isn’t it? Instead, they want to take your money and not even tell you that you are supposed to expect to receive back. If people do not know that they are supposed to receive back, they will not be looking for it or expecting it. If you think that there is no fruit on a tree to pick and eat, you wouldn’t even consider going over to the tree to look. So, good, sincere, God loving people are robbed again, this time from the blessings they should be receiving back for their giving.

Instead of making people feel guilty about what they have, and guilty about the lack others have, why not teach people about the abundance God has promised? Why not teach people how to prosper? The Bible says that God wishes above all things that you prosper and be in health. Why not teach people the principles of prosperity that are clearly defined in the Bible?

Someone may shame you into giving up fifty or a hundred dollars. But think of what could happen if instead, they taught you how to prosper. What would happen if your income increased by 20, 30, or even 50 thousand dollars a year? Wouldn’t you have a lot more to give to help people in need? And you could give to help them, not grudgingly, but cheerfully. It is not a sin to be wealthy. Money is not evil. It is the love of money that is the root of all evil.

Christians need to believe God’s promises of abundance and operate the principles of prosperity. Then their lives will be blessed and abundant and they will have plenty to give to those in need.

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