How to Pick the Right Type of Loan

If you have decided that you need to borrow some money then it is really important to make sure that you choose the right sort of loan. There are so many types that you can choose from and if you pick the wrong one you could end up paying a lot more than you need to as well as not getting the service that you need. Therefore, you need to make sure that you get it right. Before you start to look make sure that you have some information to hand –

  • How much you want to borrow
  • How much you can afford to repay each month
  • How long you want to borrow it for

It should be fairly easy to work out how much you want to borrow based on what it is that you need the money for. Compare prices though, if it is an object you are buying to see whether you can get it cheaper, so that you can borrow even less. Try not to borrow more money than you need as this will end up costing you more money. Think about how much you have available to use for repayments. Not all loans have a specific repayment schedule but if it does, you need to be sure that you will be able to afford it. Work out how much you can afford by looking at past bank statements and seeing how much money you usually have available each month once you have paid out all of your bills and bought everything that you have to. Think about how long you are prepared to have a loan for. You might be reluctant to have one for too long, perhaps because you have other financial commitments in the future or because you just do not like the idea of having a loan for long or you might decide that you just want to have a loan for as short a time as possible.

Once you have this information you will be ready to look at the different loan types and choose the right one for you. Some are designed for specific purchases such as a mortgage, car loan or student loan. A personal loan tends to be for higher amount compared with a credit card, overdraft or payday loan. So, the amount that you want to borrow will influence the types of loans you can choose from as well as what you are borrowing for. If you are looking for a short term influx of cash however, is a great choice.

You should be able to find out how much the repayments will cost for each loan type so that you can work out if you can afford them. Some loans have no repayments or very few, such as an overdraft or credit card. An overdraft just gets repaid as money goes into the account and a credit card only need you to repay a very small amount each month if you wish to.

Borrowing can take place over a fast or slow timescale depending on the type of loan you choose. A short-term loan, such as a payday loan has to be repaid within weeks, an overdraft or credit card can be repaid whenever you like. A personal loan will have scheduled repayments but you may be able to pay back extra, so that you repay it earlier, depending on the lender’s terms.

It can take time to work all of this out, but once you have done it for one loan, then it will be easier to do if you decide to borrow again. It will also allow you to be aware of the costs of loans and it may help you to think harder about borrowing and whether it is worth it or if you can afford it. You could find that by avoiding a mistake by picking the right loan, you could end up saving a significant amount of money compared with picking an alternative. It is certainly worth the effort if this proves to be the case for you. Even a small saving could make a big difference if you find money to be a struggle.  You may find that there are loans that you decide to consider that you did not know existed before and it could therefore open up your options and help you to have a lot more choices,

Once you have worked out which loan looks to be the best type for you then it is really important to compare the lenders that are offering these loans to see which will be the best for you. There are lots of lenders out there and so you will find that they vary a lot, not only in how much interest they charge but, in their fees, customer service, reputation and things like this so make sure you check them out thoroughly and compare a lot in order to ensure that you get the best deal for you.

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How to Get out of Debt Quickly

If you have debt then you may feel that you need to get rid of it as soon as possible. Although this may not be necessary in the case of good debt, if you have a lot of bad debt then it will be wise to see what you can do to pay it off as quickly as possible. There are a number of steps that you can take which will help you to get out of debt as quickly as possible,

  1. Assess your debt – what you need to do here is to check all of the debts that you have and carefully scrutinise them. Think about whether the debt that you have is good or bad. Good debt is usually that which is used to purchase things that will benefit you and your future and have been taken out at the best rate possible, Bad debt is usually spent on luxury items and taken out at an unnecessarily high rate of interest. Even if you have good debt, you may still want to repay it, but it is best to start with repaying the bad debt or that which is most expensive first.

To see which debt is the dearest may take more calculations than you think. You will need to not only compare the interest rates between the loans, although this can be a good place to start, but look at the actual real cost of the loan. This makes a difference because there may be charges as well as the interest and a loan that lasts for longer will be more expensive as there will be more interest payments to pay. So try to work out how much the loan will cost you in total, until it is paid off, based on the current repayment plan.

  • Try to find cheaper loans – it is wise to look at what is now available and see whether there are any cheaper deals out there. If you swap your lender you could end up paying less interest which will save you money. You can use the money that you have save to repay the loan early and save even more money. Do be careful though. Some lenders will charge an early redemption fee for repaying before the agreed date. Check to see if your lender has this and calculate whether it will still be cheaper for you, if you repay it early. If you are not sure, do not have a copy of the terms or find it too complicated, then contact the lender and ask them, they will be able to tell if there is a fee and how much it will cost.

If you find the whole business of calculating what you are paying and comparing the cost too tricky then you could ask a financial advisor to help you. These are expensive but if they can end up saving you a lot of money, then they could be worth the cost. Try to get a free consultation with a few to ask them whether they will be able to help and if they think they can save you more money than they will charge you.

  • Stop borrowing even more money – once you have made the decision to repay your debts then it is wise to make sure that you no longer borrow money. Do everything that you can to prevent this. This will include not spending on credit cards that you are not repaying in full each month, not increasing your overdraft and not taking out any other loans such as payday loans. This can be tricky, especially if you have got into the habit of doing this. However, you need to be self-disciplined if you want to stop doing this and hopefully because you want to pay off your debts you will have some determination that will help you. If you think you need reminders then put notes on your credit cards, purse, wallet, computer and any places that you go to when you want to spend money. Remind yourself that you want to repay your debt and so need to reduce your spending and only buy what is really necessary until that debt is paid off.
  • See whether you can reduce your spending – in order to repay debt you will need to reduce your spending elsewhere. The obvious thing could be to cut down on luxury items for a while that we do not need, such as eating out, take away food, alcohol, new clothing, evenings out, holidays and things like this. However, many people struggling with debt do not spend on this type of thing and find that it is the day to day things that are tricky such as electric bills. Comparing prices on everything that we buy including electricity, insurance, television, phones and things like this could lead to us finding some better deals and paying out less for the things that we have to buy.
  • Try to earn more – if you can see whether you can find a better paid job, work more hours, take on a second job or earn money in other ways so that you have more money available to pay off the debt.
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