Become a Smarter BorrowerWritten by G Marwick
With a nation that has in region of a Trillion pounds of debt one could say we are serial borrowers. Before you consider borrowing money it is wise to consider a few important points. • Shop around for best deal This may sound like a no brainer but many people still use their high street bank to borrow money. These are usually most expensive and with Internet you can spend 30 minutes in your home finding best deal. • Make sure you understand APR Although lender will outline APR charges this may not be actual amount you will be paying. Make sure you get true cost of your loan. • Keep repayment period as short as possible The longer you take to pay off your loan more expensive it gets. Try and limit repayment period to less than 5 years. For example, a £5,000 loan borrowed over five years at an interest rate of 9% will cost you £103 each month, this may sound affordable. But overall, it will cost you £6,176 - £1,176 in interest. If you borrowed it over three years, your monthly payments would be £158 an increase of 53% in payments however you would only be paying back £5,694, which is substantially less. • Make sure you read fine print Lenders make a fortune in charging their customers payment protection. There are usually several conditions attached to this kind of protection so make ensure that you get protection you want should you not be able to keep up payments. There are usually redemption penalties if you pay your loan off early so make sure you are aware of these charges before hand.
| | The Burden of DebtWritten by G Marwick
Over recent years personal debt in UK has exploded. Since 1997 total debt including mortgages was in region of £940 million. Approximately 18% of that figure is unsecured credit, accounting for about £8000 per household.This is a staggering amount of money. With interest rates being raised several times last year, strain of maintaining our debt is taking its toll. Sources reveal that UK’s debt “has increased every single month without fail since April 1993”. As it has been relatively cheap to borrow money over that last few years it has been very easy to get access to money. Interest rates are widely predicted to rise further adding even more to current £5 billion we are paying every month in interest. According to FSA (Financial Services Authority) one pound in every 10 we spend is borrowed money. It’s very easy to shop around for good rates when borrowing money. Most of us still buy our financial products on high street and big Financial Institutions base price of their products on what they think is maximum borrowers are prepared to pay. With internet people are able to shop around for much better rates and this is driving average price of borrowing money down. This does pose a catch 22 situation as cheaper cost of borrowing becomes more people will feel they can borrow more. This does breed a nation of people that are living beyond their means. Debt can be very dangerous as you are effectively borrowing from your future to pay for today.
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