Can someone explain in simple terms the effect my bank(s) failing could have?

raggydoll_2

I'm slowly getting my head around how all this economy stuff works
Can someone explain what is likely to happen in each of the following cases - ie. what i need to be concerned about or what action i should be considering taking?

1. The bank i have my mortgage with fails
2. The bank i have my current account with fails
3. The bank i have my personal loan with fails

Sorry if this is a stupid question as i said i'm pretty new and ignorant to all thism

Thanks

hostman

You'll still owe the debt, if that's what you mean.

If a bank were to go "bust", its assets will be sold on to another bank, usually at a "fire sale" price, i.e. at a discount. You still owe and pay the debt as normal.

raggydoll_2

Thats great thank-you

pillsbury33

raggydoll wrote: »

I'm slowly getting my head around how all this economy stuff works
Can someone explain what is likely to happen in each of the following cases - ie. what i need to be concerned about or what action i should be considering taking?

1. The bank i have my mortgage with fails
2. The bank i have my current account with fails
3. The bank i have my personal loan with fails

Sorry if this is a stupid question as i said i'm pretty new and ignorant to all thism

Thanks

1. The debt you had will be sold to another bank, you'll then become their customer
2. If you have less than £50k with the bank, the Financial Services Compensation Scheme will kick in and return your money within 3 months (apparently with accumulated interest up until the point of failure. Only the first £50k is guaranteed per institution - check which banks are under the same parent company as this is the institution, not the individual bank e.g. Halifax and Bank of Scotland are one. Anything over £50k is at government discretion, they have guaranteed IceSavers > £50k, but I wouldn't count on this for the next failure if there was to be one. In short, keep all accounts less than £50k in one institution.
3. See 1.

sassyesque

That advice really helped me out too. I have been panicking. Been one of those years. Mortgage and personal loan with Northern Rock and current account with Bank of Scotland. Have also just received a lump sum from an out of court settlement following a bad crash. Not a huge amount, but the most ive ever had in my account at one time and have been wondering whether to take it out or not but dont want to contribute to the mass panic. So this money should be protected? If the bank is bought over will everything just continue as normal, ie, pay going in and bills coming out? Sorry for being a pest with all of these questions but this is our first home and I dont have family to ask. Thanks

Obukit

sassyesque wrote: »

So this money should be protected?

How much is it and is it with Bank of Scotland (or another UK bank?). If less than £50k, it's all protected, and to be honest if it's more than £50k the govt. implicitly guaranteed all savings anyway. Nonetheless, it's best to spread it round different FSA licensed banks for surety.

Definitely don't take it out - keeping money in cash is the least secure way (there's more chance of theft than you losing your money in a bank), plus inflation is relatively high so every month you'll be throwing away almost half-a-percent of the value of your cash!