(Reuters) – When businessman Colin Jones approached his local bank for a loan in 2007, he had little idea what an “interest rate swap” was, let alone a “structured collar”.
Jones wanted 400,000 pounds ($630,000) to buy a small hotel in North Wales and Royal Bank of Scotland said he could have the money if he also took out a swap – a form of insurance designed to protect him from a rise in interest rates.
Like a growing number of small business owners in Britain, Jones now regrets signing up. His hotel was repossessed in July last year after a sharp drop in rates during the financial crisis pushed charges on the deal to an unaffordable 30,000 pounds a year, the same as the repayments on his loan.
“I’ve lost my house, my wife and I have separated, I lost my self respect and I lost the respect of my local community because they don’t see what’s going on in the background. People just assume that you’ve done something wrong,” Jones said.”
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