Categories
Loans

How to Know if it’s the Right Time to Take Out a Loan

If you are considering borrowing money, then you may wonder whether it is a good time for you to do so or whether you should wait. There are various factors that you should be considering when you are thinking about this.

When Do You Need the Money?

The first consideration should be when you need the money. If you have an emergency situation then you will have no choice but to borrow right away. This could be that you need to pay a bill, pay rent, buy food or something that that which will have bad consequences such as eviction or hunger if you do not have the money. It could also cover things like car repairs, that if are not done will get worse and be more expensive to fix in the future. So, you need to think about whether you really need to money right now or whether there is some flexibility in when you will need it. You may really want it now, but this is very different to needing it. If you can wait, then it might be wise to wait a while and then you will be able to take time to save up a bit of money and then you may be able to borrow less or avoid borrowing altogether.

Can You Afford the Repayments?

It is also important to look at the repayments and think about whether you will be able to afford these. You need to consider whether you will be able to afford them anyway or whether you will need to change the way that you spend or earn money so that you can afford them and whether that will be possible. It is wise to work out how much you can afford to spend and this will help you to be able to decide whether you can afford the loan. You will find that the repayment amounts will vary depending on which loan you choose and so you may find some more affordable than others. There are even some that are more flexible about when you repay and how much and they could be worth considering. They do tend to be more expensive though but it is worth thinking about whether it is worth it for the flexibility. It is good to work out the full cost of the loan and compare it to costs of other loans so that you can decide whether you think that it will provide you with good value for money.

What are Interest Rates Likely to do?

It is also a good idea to have a think about interest rates. If the loan has a fixed rate of interest then this will not matter as the interest rate will not change at all. However, most loans have a variable rate of interest and this means that they are likely to change during the time that you have them. It is often the case that loan interest rates will go up when the base rate of interest, as set by the Bank of England, goes up. This means that you might want to consider whether you think the rate of interest will go up and if so whether you will able to afford this if your loan interest goes up as a result. This is a very individual calculation and it will depend on whether you feel you will already be struggling or whether you the repayments will be easy. It is worth calculating quite high interest rate increases to work out how much that would impact your loan repayments and think about whether you will still be able to afford them.

Categories
Credit Cards

How to Pick the Best Credit Card

If you are looking for a new credit card or looking for one to replace the one that you have, then it is a good idea to have a think about what will make a good credit card. There are quite a few differences between the different types of credit cards and it is a good idea to think about what might suit you the best, depending on how you use your card.

If you Repay in Full Each Month

IF you always repay the full balance each month then comparing a credit card on cost will not be useful as you will not pay any costs. However, you might be interested in a cash back card. There are different lenders that offer these cards and they will give you some money when you make a purchase. The cashback is added up and then credited to your account towards the cost of the following month. The cashback is a percentage of what you spend and therefore you could find that it will be quite small. The actual percentage is small and therefore you will not get a huge return. However, it will be a small bonus and better than nothing. It is worth noting though that the interest on these types of cards tends to be more expensive and so if there is any chance that you may not be able to repay then you might need to consider whether this is right for you. Also, you need to be sure that you will not spend more money than you intend to because of using the cashback as an excuse to spend. The return is very low, it should just be seen as a little bonus rather than a reward for spending.

If you Only Repay the Minimum

If you only tend to repay the minimum amount off your credit card, then the interest rate will be the most important factor for you. This is because you will be paying interest all of the time and you want to make sure that you are not paying more than necessary. It is a good idea to think about how much it is costing you to do this and how much you could save if you had a low interest rate. It is also good to consider paying more than the minimum as you will save a lot of money doing this. You could just increase what you pay a little bit and perhaps reduce how much you use the card so that you can get things under control.

If you Have Lots of Outstanding Debt

If you have a card with lots of outstanding debt then it could be worth considering a balance transfer to a 0% interest card. These will allow you to transfer your debt to another card and then you will have a period of time where you will not be paying any interest. The interest free period will not last forever, but it will allow you to be able to have a breather while you come to grips with the debt. It might give you enough time to be able to repay it. It is worth noting that interest rate after the interest free period can be higher than average so you will need to make sure that you try to repay everything you own during the interest free period. This period might only be a few months, perhaps up to six months, so you will need to think hard before you do this, to decide whether it will be something that will suit you or not.

Categories
Mortgages

How to Make Sure You Can Cover Your Mortgage Payments

It is important to make sure that you will always be able to cover your mortgage payments. This is because if you miss too many payments, you will end up with having your home repossessed and this is not something that anyone wants to happen. Therefore, it can be a good idea to make sure that you are able to cover those repayments. Whether you are just taking out a mortgage or have been paying one for a while, there are different things that you can do which should help you.

Consider Interest Only

An interest only mortgage is one where you just repay the interest each month on the mortgage and then at the end of the mortgage term you will need to repay a lump sum of money to pay for the house. This type of mortgage can offer you some flexibility as you will only need to pay the interest each month, and you can choose how much you repay. You could repay it straight form the mortgage or you could put it into a savings account or invest it. There are lots of different choices that you can make. While it is very important to make sure that you have enough money available to repay all of the mortgage when you have to, you also need to think about the fact that this could be a more flexible option and if you go through a particular time when you are short of money then you can put less aside towards repaying the mortgage for a while. Of course, you will have to make this up at a later date and if you are close to the end of the mortgage term then this might not be possible.

Prioritise Mortgage Payments

It is very wise to make sure that you prioritise mortgage payments over other spending. It is a good idea to make sure that you try to schedule the payments so that they go out of your bank account just after you get paid. This will mean that there is a better chance of there being enough money available for you to spend. You also need to think about whether you have enough to be able to afford to do this to cover everything else as well. It can be wise to wait and only spend money on things that are necessary until you are completely sure that you have paid for everything that you need.

Cut Down Luxury Spending

You may find that you will need to cut down on spending on luxury items anyway, so that you are sure that you have enough money for paying essentials such as your mortgage. Luxuries are anything that is not completely necessary and we may be spending more money on these than we realise. It can be wise to have a look at our spending pattern and see what we are spending on these sorts of things and think about whether we can reduce that spending at all. It could be possible to do so.

Have Some Savings as a Buffer

It can be useful to have some money in a savings account which you can use as a buffer. This will enable you to be able to have a backup just in case you do not have enough money for your mortgage, or in fact any other essentials in a particular month. You will need to keep the account topped up so that you will be able to use it again, if you have recently used it. It can also provide peace of mind to know that you have some money in an account that you can use if you need to.

Categories
Insurance

How to Reduce the Cost of your Car Insurance

We all have to pay for insurance if we want to drive a car. It can be a bit annoying but it is the law and so we will need to do it. However, there is often no need to pay as much for the insurance as we are paying and so we can save some money. However, many of us will just continue to do what we always do and not think about cutting the cost. There are quite a few different things that you can try though, which will reduce how much you have to pay.

Compare Prices

The best way to start is to compare prices between different insurers. You can use a broker for this or a comparison website. Then you will know whether you are paying more than necessary. At this point you will not want to switch but you just need to know what sort of prices are available. You will be able to use this as a way to decide whether you think that the amount that you are paying seems too expensive. You will find that the prices can vary quite a bit and this could be because some insurers are just more expensive, perhaps because they are more well known. It can also be the case that the cheaper insurers may not give the same cover as your current insurer.

Switch Insurer

Therefore before you switch insurers it is a good idea to find out what cover you are paying for or just thinking about what cover you want. You may just be happy with the basics, but you may want to cover costs of accidental damage to your vehicle, having a hire car while you are having your vehicle repaired or being able to cover you when you are travelling for work or abroad. It is a good idea to make a list and then when you are comparing insurers you can see how much it will cost for you to get this cover.

Negotiate Price

If you want to stay with your current insurer, then it can be a good idea to consider whether you should try to negotiate with them to lower the price. When the insurance comes due for renewal then this can be a good opportunity to ask them whether they are able to offer you something a bit cheaper. If you have already got some quotes then you will be able to let them know that you have had some lower prices and this might help to encourage them to lower the price. If you are switching to a new insurer it can still be worth asking them whether they can lower their prices as they may be able to lower their prices even more, although they do tend to offer pretty low prices to new customers anyway.

Change Features

It can also be worth checking what you are actually covered for. You could find that you have insurance cover for more than you need and therefore you will benefit if you are able to reduce those things. Sometimes there are optional items within the cover and so it is worth speaking to the insurer about this and finding out whether they will be able to reduce what you are covered for and be able to reduce your premium as a result. It may also be worth considering reducing the excess. This is the amount that you have to pay before you get the money that you get paid for a claim. If you think you are unlikely to make claims or you do not want to make small ones in case it means that you will have your premium raised then having a high excess and paying a lower premium could be in your advantage.

Categories
Mortgages

Variable Versus Fixed Rate Mortgage – Which to Pick?

There are lots of different mortgage lenders and types of mortgage and whether you are taking out a mortgage for the first time or remortgaging, it can be tricky to decide which lender will be the best for you. It is a good idea to think carefully about this as it could make a really big difference to how much you pay in total for your mortgage. Although you will be able to switch lenders, it is not something you will want to have to do too often as there can be costs associated with it and it is a hassle. You may also be tied in with some mortgage companies and so you may not be able to switch that easily. You will therefore need to a lot of thinking before you sign up. One of the first decisions you will need to think about is whether to go for a fixed or variable interest rate. This can be a tricky decision to make so it is worth finding out more about the different types of rates and the pros and cons of using them,

What is a Variable Rate?

A variable rate mortgage is where the interest rate that you pay can vary. This means that the lender is able to change the rate whenever they want to. This is often done as a result of the Bank of England changing the base rate but it can be done at any time.

Pros and Cons of a Variable Rate

With a variable rate you will tend to have a lower interest rate. However, if the rates go up then you will end up having to pay more compare with a fixed rate which cannot go up. It can potentially be a cheaper way to borrow if rates do not rise, but it is very hard to predict whether they will go up or not. Of course, there is always a chance that the rates will go down as well. If the Bank of England base rate goes down then the lender may also put their rates down. This can mean that you will end up paying less, which is great, but unless you have a tracker rate then the lender may choose not to put their rates down. However, as you will not be tied in, you cam always switch to a cheaper lender if you feel that yours is no longer competitive.

What is a Fixed Rate?

A fixed rate is where you stay on a certain interest rate for a certain time period. This period will not be for the full length of the mortgage but it is likely to be for a number of years, perhaps up to five years. How long you are fixed for and the rate you are fixed at will vary between lenders.

Pros and Cons of a Fixed Rate

The appeal of a fixed rate for many people is that their repayments will not go up. This means that if the Bank of England puts the rates up they will be protected. If the borrower is already only just managing to afford their repayments, this will protect them against the risk of having to repay more. However, if the rates go down, they will not benefit either which means that they will continue to pay the rate they have always been paying. If rates go down a lot, then this could mean that their mortgage will be very expensive. Also, with fixed rate you are often tied in. This means that you often have to stay with that lender for a certain period of time. This might be several years or longer. It can mean that you will not be able to swap to a cheaper lender.