19th March 2017
How to Find the Best Loan Rates
If you are borrowing money it is wise to compare borrowers to find the best loan rate. This because you will be paying a lot for the privilege of borrowing and you want to make sure that you pay as little as possible. Just a small difference in interest rates can make a big difference to the actual amount that you have to pay back for the loan, particularly if it is being paid back over a long term. This means that it is really important to compare the rates so that you get the best deal that you possibly can.
You need to make sure that you find the best type of loan first of all. Some loans are designed for specific borrowing purposes and some are more suited to small or larger amounts of borrowing. You should be able to work out which type of loan you need depending on what you are borrowing the money for and how much you want to borrow. You may still have some options though and you should compare them based on your requirements and the cost of them.
When comparing the cost it can be tempting just to look at the interest rates and compare them, but you should check other things too. All lenders will charge a setup fee for their loans and these can be quite high so it is worth finding out what these are. It is also worth noting other fees they may charge as well. These could be more hidden in the terms and conditions and will be for things like late payments, early redemption and moving the loan to another lender. You may feel that comparing interest rates is silly because the rates will change (at least on variable rate loans). However, there is no other way to compare them and so it is worth assuming the dearest will stay the dearest etc and if rates do go up, then they will all be likely to rise and if they fall they will all be likely to fall. If you are in any doubt you could always read reviews of that lender and see whether there is any reference to whether they change their rates quickly in respond to base rate changes or not. Obviously you want them to reduce rates quickly but not put them up too hastily, but most lenders will act the other way around!
Searching every lender that you have heard of to look at their loan rates can be difficult. It can take a lot of time and you may not find all lenders. One way to make the job easier is to use a comparison website. This will allow you to compare a selection of sites at once. It will save you having to enter your details on lots of different sites to get quotes and you will be able to see them side by side. This will not include all loan providers, but it can help to narrow it down a bit and will allow you to know what is available to you.
Another way to get a good comparison is to use an independent financial advisor. They will be able to look at all of the options available to you. Not only will they be able to explain to you about all the different loans, but they will compare them for you and show you the ones that give the best rates. They will even be able to read the small print for you and let you know whether there are any hidden fees or charges. You will have to pay them for their work but it could be worth it if they can find you a lender that can offer you a really good deal.
It is important to realise that even if lenders advertise a certain rate they may not offer that rate to you. This can make comparing a lot more difficult. They will advertise their best rates, but they may not offer you that rate if you have a poor credit rating. Most lenders will probably use similar means to decide what rate to offer their customers, so the ones that offer good rates will probably still offer you the best rates even if they are higher than those advertised. However a financial advisor will tell you whether this is true for sure.
So a financial advisor is probably the best way to find the best loan rates. However, if you would rather do the research yourself or not pat a financial advisor then a comparison website will speed things up for you. However, they will not have every lender listed and they may not compare on a like for like basis so that may not be the most accurate way to compare. If you appraoach a lot of lenders for quotes then this will be very time consuming but will ensure that you get all of the information that you need.
19th March 2017
Is Borrowing Money to Buy a Car a Wise Idea?
A car can be a really expensive purchase and this is why a lot of people borrow money in order to buy one. This is understandable but it is worth considering whether it is a sensible idea for you.
Debt is always expensive. Whatever type of debt that you have; it is likely that you will end up repaying more than you borrowed. This because the lender will charge you for that service. This means that you need to consider that the item that you buy with the money that you have borrowed will actually cost a lot more than the sale price because of the cost of the loan that you are taking out to buy it with. You have to decide whether that extra cost is worth it. It is not always easy to make this decision.
It can be very difficult to say whether a loan is a good or bad idea. It can very much depend on the borrower’s personal circumstances but also on what will happen in the future. With no crystal ball, then it is necessary to make a risk assessment, predicting different future outcomes and consider which option is the best for you. This is not always easy to do because you have a desire for the car which will be likely to override other things. Try to step away from the situation and look at things logically to make a good decision which is well thought out.
It is wise to start with thinking about the amount that you need to borrow. It is worth getting a car which you think will be reliable and will last a god few years without needing major repairs. If you want this, then you will need to pay a reasonable amount of money for it, in order to get good value for money. However, there is a point where if you pay more money, you will not get a more reliable car. Some brands of car are more expensive anyway and bigger cars are generally dearer than smaller ones. Some types of car, such as sports cars or ones with special features can be more expensive too. The differences in reliability between these are generally not related to their prices. Therefore it could be worth opting for a cheaper brand of car which is smaller and has less fancy features, in order to keep the price down. Then, if you do decide to borrow money, you will not be borrowing more than you need.
It is also important to consider what you will be using the car for. If you will be using it to go to a job and you do not have a car at present, then it could be a worthwhile investment. If you could not do your job otherwise or if public transport is more expensive, then you could find that you will be better off having the car. Although the loan will cost you money on top of the price of the car, if having the car leads to you being able to earn, then this could be well worth it. However, if the car is just for fun, then it is a more difficult decision. It will enable you to visit more places, but can you really justify the cost for this. It depends really on whether you think it will add a lot to your life and how much pleasure you will get form it compared with any problems that may arise as a result of having the loan, such as having to go without things each month in order to manage the repayments.
You do need to consider the future though. Think about whether it is likely that you will able to afford the car repayments for the full term of the loan. The loan may go on for a number of years and you will need to be sure that you will be able to afford those repayments all of the time. Consider what might happen if you lose your job or cannot work and how you will manage the repayments then. Think about the likelihood of this happening and whether you are prepared to take the risk.
It is also well worth comparing loan costs before taking one out. It can be tempting to get the loan form the place that you buy the car as it is convenient. However, this can be a really expensive way to borrow money ad it is worth comparing lenders. A few percent difference in interest rates can make a big difference over the term of a loan, so compare some and work out how much you will be paying in full using different lenders. Remember to make sure that you include the setup fee and any administration charges as well.
19th March 2017
Should You Pay Your Student Loan Back Early?
A student loan is something that is commonly taken out to cover the costs of a university degree. With grants no longer available for many students and much lower in value, most students will need to borrow money to pay for their course. Some, however, do not like being in debt and once they start working, feel like they should pay back the loan as quickly as possible. However, this may not be the best thing to do.
Unlike most types of loans, student loans in the UK, have no interest charged on them while the student is doing the course. Once the course ends, whether they complete it or they drop out, the interest will start accumulating. This is because the government will cover the cost of the interest while the student is at university. Once they leave, it is assumed that they will get a job and therefore have the resources to repay the loan and the interest charges start to be added on.
Some students can earn a lot of money and could be tempted to overpay their loan or they save up so much that they could pay it off. This is not normally something that is recommended though.
A student loan works very differently to other types of loans. The repayments are not made using a direct debit form a current account like normal loans, but because it is organised by the government, the repayments go out through your tax code. This means that you will pay extra in tax and some of this will go towards repaying the money that you borrowed for university. The advantage of it being done this way is that it will not affect your credit rating as the loan does not show up on your credit record. This means that even if you want to take out a mortgage, there will be no disadvantage in having this type of loan. The amount you can borrow for a mortgage tends to be based on your gross income, which means your income before tax and so the student debt will not have an impact on this either.
The amount of interest charged is protected by the government as well as the amount that you have to pay. You make repayments as a percentage of your income. This means that only when you are earning over a certain amount of money will you need to start repaying the loan and therefore it should be affordable for you to do so.
Many people do not like the idea of being in debt though and would like to be able to pay the loan back early so that they no longer have the debt. However, they are usually advised not to repay early because it may mean that they are paying back more than necessary. This is because of the rules surrounding the loans. If you stop earning enough, then your requirement to make repayments will stop or reduce. There is just a thirty year window for repayments and then the loan will be written off. This means that you could find that you never earn enough or for long enough to be able to make all the repayments and therefore never pay back the loan in full.
There is nothing to stop you paying it all back, early and in full if you want to. You may feel morally obliged to do so and may feel that your course was really worth the money and you want to make sure that you have paid for it. However, other people may feel that it is fair that they pay back less if they cannot afford to make the repayments and therefore will only pay what they have to, in case they stop being able to pay in the future. It is hard to predict what might happen, but redundancy is always a possibility and stopping work to look after a family is another. If you have time out of work for whatever reason, you could stand to gain from not having to pay the loan repayments and it could mean that you end up paying less back than if you just paid it all off.
If you are confused, then it could be worth getting financial advice on this. The loan rules do change form time to time as well so you need to be completely sure of how it works in order to understand what the best way will be for you to manage your loan and its repayments. The government has been known to change the rules for those paying back loans in the present as well as for new borrowers, so it is wise to keep an eye on what is going on and any changes In the system so that you can assess whether any changes mean that you should change the way you are repaying.