I’m a mole - so I’m used to being in a hole.

If you’re a human - that’s different. Let’s be brutally frank, we know that lenders are irresponsible when it comes to handing out money. How else can you explain why so many people are defaulting on their loans?  I mean, take a gander at Scotland - it’s been reported that 40 people a day are declared insolvent. In 2006, more than 14,000 Scots were declared insolvent in the worst year on record for Britain’s debt crisis.

My old mate, Matt Henderson, of business accountancy firm, Johnston Carmichael said recently: “Debt problems in our society are in danger of spiraling out of control unless action is taken now to tackle the causes.”

It’s what Big Jim Spowart, our chairman at Peopleschampion.com, has been saying too for some time. We face Generation Debt unless we do something drastic. Matt Henderson has called for improved teaching in schools on how to budget and the danger of debt - but I think it will need much more than his. I also blame the ease in which people can dodge their responsibilities with a quickie personal bankruptcy.

The Financial Ombudsman Service recently sent a letter to the British Bankers’ Association with its recommendations to improve the Banking Code, which exists to help consumers. While the letter is, in my opinion, too soft in tone, it is full of damning criticisms. The biggest of these is about the section in the Banking Code that is meant to ensure responsible lending.
The Ombudsman highlights one section of the Banking Code which says: "Before we lend you any money or increase your overdraft, or other borrowing, we will assess whether we feel you will be able to repay it."

The Ombudsman then reveals that complying with this needs only entail checking on the customer’s identity and finding out what he wants to borrow the money for! This is pathetic. If banks are serious about lending responsibly, they must assess prospective borrowers’ income and expenditure. They would not allow people to go over their agreed overdraft limits and they wouldn’t lend money at 30% plus interest.

So there’s the proof - if you needed it, we can’t rely on the banks. So here’s the Mole’s tips to becoming a better borrower.

• Ask the golden question: “Do I need this now?” Don’t borrow unless you have to. Start saving for things such as holidays, cars, weddings and university fees. You’ve got two choices: a) save up and earn interest, or b) borrow the money and pay interest (at a much higher rate). This is a no-brainer for a Mole.
• Don't borrow so much that you have nothing left for an emergency.
• Borrowing in order to meet repayments on other debts is not a smart decision, no matter how small your debt is. If you’re doing this then you need start living on what you bring in.
• Watch the interest rate like a hawk. If the only loan you can get charges you 30-200% APR, you should be looking at other ways of getting out of debt.
• If you have got to the stage where you are even considering taking out a secured loan, you are in deep soapy water. This is dangerous territory - so be very careful and seek professional advice.

Hope this helps a little. Speak to you all soon.

Toodle-pip!