Reducing the cost of your personal loan
October 29, 2010
If you are thinking of taking out a personal loan for whatever reason you need to first determine how much you can realistically afford to repay each month, as this will give you an idea of how much you can afford to borrow and what sort of repayment terms you should be looking for.
In the current climate most people cannot afford to pay more than they have to, and most of those that take out loans are hoping to keep the costs down as much as possible in order to ensure that they do not overstretch their budgets. In order to keep costs low when taking out a personal loan there are a number of things that you should bear in mind.
First of all don’t be tempted to take out more than you need, as all this will do is push your repayments up, and you will probably end up wasting the excess cash that you didn’t really need. Work out exactly how much you need to borrow and then stick to that amount.
Make sure that you compare a range of loan providers, as the interest rates on personal loans can vary widely from one provider to another, so you may find that there are big differences in the rate that you will be charged. Another thing you need to look at when you compare loans and providers is the repayment period that is available. The longer your repayments the less you will be paying each month, as you will be spreading the loan over a longer period - although do bear in mind that you will pay more in interest over a longer period.
Of course, it is not just new loan customers that are looking to reduce their repayments due to financial difficulties - many people that have existing loans may also be looking to reduce the amount that they pay, and there are a number of solutions for those that want to try and reduce their existing loan repayments.
One potentially effective solution is to take out a low rate consolidation loan over a longer period of time and use it to pay off your loan, plus any other loans and credit cards that you are paying. This can help you to reduce the amount you pay out each month and cut the number of debts and creditors that you are dealing with.
Another option is to contact the lender, explain your financial situation, and ask if you can extend the term of the loan to reduce the repayments or simply make lower repayments for a period of time.
Why are secured loans such a risk?
October 29, 2010
In the past taking out a secured loan was a very popular way of getting some much needed cash for some homeowners, and there were many people that had equity in their homes who decided to tap into the unlocked cash in their homes and use it for something that they wanted. With a secured loan homeowners were able to borrow potentially much more than with an unsecured loan and had far longer to repay it, making this an affordable way of borrowing.
These days unsecured loans have changed somewhat in that they are no longer as freely available to homeowners as they were, namely because of the property market and the effects of the global financial crisis. Over the past few years homeowners have seen their property values plunge compared to the level they were at when they reached their peak, and this has seriously affected homeowners’ ability to borrow in this way.
However, there are still some people that have equity in their homes and who might be tempted to take out a large loan secured against their property. This can be a very risky business, especially in the current financial and economic climate where many people are worried about their finances and whether they can keep up with debt repayments.
The threat of job losses is still a very real one for many people, especially since the government announced that hundreds of thousands of jobs would go in the public sector, which could then have a knock on effect on the private sector. Job losses could mean that the borrower may find that they cannot keep up with the repayment on the loan.
The nature of a secured loan means that if the borrower defaults on repayments for whatever reason the lender can take the money that is owed from the value of the home, and this means that taking out a secured loan can place a serious risk on your home, which you could all too easily end up losing.
It is always advisable to think very carefully before taking out a secured loan, and if you are not confident that you can keep up with repayments over the long term you should question whether this is the right solution for your financial needs, as you could lose your home as a result of failure to keep up with repayments.
Consumers wary about taking out loans
October 28, 2010
It has been reported that consumers are becoming increasingly cautious about taking out loans, despite the fact that many people are struggling with their finances and many could use the money for work around the house, to consolidate debt, make purchases, or even to fund the up and coming Christmas period.
The global financial crisis and the recession has really taken its toll on household finances over the past couple of years, and many have struggled to make their budget stretch far enough. This has resulted in people turning to their credit cards, overdrafts, and even high interest loans to tide them over, but consumers are growing increasingly cautious about taking out loans.
Lenders have seen the appetite for personal loans falling over recent months, and although many people have wiped out their savings in order to make ends meet many simply won’t take the risk of getting into any more debt. The same has happened with mortgages, with many reluctant to take out a mortgage in the current climate, which has resulted in property prices falling due to lack of interest from buyers.
The recession left many people out of work, and although the recession is officially over many are still concerned about the security of their jobs, which is why so many people are so keen to steer clear of taking out new finance.
On top of this the recent Spending Review from the coalition government has made people even more wary about taking on new loans, with the huge cutbacks likely to affect many jobs. This has once again increased fears amongst consumers, who are now fearful of losing their jobs due to the cuts in the public sector and the possible knock on effect in the private sector.
Workers becoming more reliant on payday loans
October 21, 2010
According to a recent report workers are becoming more and more reliant on payday loans to get them through the month, with many finding it difficult to make their finances stretch far enough without turning to these loans. Whilst payday loans can be useful on occasion those that are using them regularly can end up paying a fortune in interest, which is something that concerns many industry officials.
The interest rates on these payday loans can reach an astonishing 2700 percent a year. Officials have said that these loans are effective for occasional use, as they eliminate the need to cash strapped consumers to turn to loan sharks. However, a rising number of consumers are using these loans and then rolling them over from one month to the next, which is resulting in crippling interest charges.
Officials from Datamonitor said that the situation is set to get worse, with the number of people using these costly short term loans set to triple over the next five years. £1.2 billion was borrowed through these loans in 2009, but the research by Datamonitor suggests that this is set to increase to between £2.7 billion and £3.5 billion by 2014.
The increase is likely to be fuelled by changing employment patterns, with the government cutbacks and the economic downturn leaving many people struggling to make ends meet. Many of these lenders do not carry out credit checks, and the loans are available quickly, which has made them increasingly popular amongst consumers who are able to prove that they are working.
Daoud Fakhri, analyst at Datamonitor, said: “There has been an increase in the number of people working part-time and by the hour which has meant that there’s been a greater fluctuation in pay, leading to cashflow problems for many consumers.”
More people could need help with debt problems
October 15, 2010
A recent survey has suggested that a greater number of people are likely to need debt and advice and assistance now than three years ago. The conclusion was reached following a survey of household finances, which looked at the amount people saved, spent, and had left over each month compared to three years ago.
The results of the survey showed a much bleaker picture than three years ago, with millions of households now worse off in terms of their finances. The global financial crisis and the recession has played havoc with the finances of many people and for many debt problems are becoming more and more of an issue.
The research was carried out by Legal & General to form part of its MoneyMood Survey, and the results showed that nearly three million households across the UK were no longer able to save money like they were just three years ago. It showed that around 2.8 million households were now in a worse financial position than they were in 2007.
The survey also showed that there had been a significant reduction in the expense cover, which is used to describe the number of families who had cash left over to spend once all of their bills and financial commitments were paid.
In September 2007 research showed that around 60 percent of households had money left over to spend once household bills and other financial commitments had been paid each month. However, in September of this year this had fallen to around 50 percent.
Mark Gregory, executive director of savings at Legal & General, said: “Right across the country, no matter where they live, people are reporting that they’re worse off now than just a few years ago.”
Businesses still finding hard to get finance
October 15, 2010
It has been reported that many businesses in the UK are still finding it very difficult or impossible to get a loan. A survey was recently carried out the results of which showed that over a third of companies said that over the past year they had found getting a loan more difficult.
In total around 38 percent of firms said that they had found it more difficult over the past year to get a loan, and officials believe that the figure will come as a shock to government officials, who have been taking measures to try and get banks to start lending to businesses again and subsequently strengthen the economy.
The 38 percent of firms in question said that they believed it was more difficult to get a business loan now than it was a year ago, when the country was still in the depths of recession. Only 9 percent of respondents to the survey said that they thought it was now easier to get a loan than it was a year ago.
The survey results do seem to indicate that things have recently started to improve, as only around 14 percent of respondents said that getting a business loan had become more difficult in the past quarter. One official said that the problem was nevertheless a worrying one, and was not helped by banks’ bad debts.
He said: “This is an alarming percentage of companies who are actually saying that access to bank loans is still worsening.”
Referring to banks’ bad debts he added: “This is putting the banks in a bind and the net effect is they cannot meet the growing demand for finance from UK businesses. Small businesses aren’t just making this up. There is a real problem.”
Having trouble selling your home?
October 7, 2010
Many homeowners recently have experienced disappointment when it comes to selling their property. The property market has had its ups and downs over recent years, since the onset of the global financial crisis, and this has had a real impact on homeowners in many ways, from the value of their properties to their ability to sell their homes.
After the coalition government came into power in May of this year it was not long before the controversial Home Information Packs that had been launched by the former Labour government were scrapped. This led to a surge in the number of homeowners deciding to sell their homes due to the savings they would make, and estate agents reported an increase in the number of properties coming onto the books for sale.
However, many have been disappointed with the outcome, as low demand for property from buyers has left some properties stagnating on the market. For many the only option has been to take their property off the market again, but for those that cannot sell their home there may be other options available.
Some people that decide to sell up do so because they find that their property no longer matches their needs - for instance, it may be too small due to additions to the family. However, a solution to this could be to make home improvements to make the home more suitable rather than selling the home - especially if the current location of the property is well suited.
Another reason why many people decide to sell up is due to financial problems, with some thinking of downsizing in order to save money. However, if this is not an option due to low demand for property it could be an idea for homeowners to look at solutions such as renting out their property, as the demand for rental properties is high at present due to would be buyers struggling to get mortgages to buy their own places.
Those that need to save money could also look at taking in a lodger and renting out just one room in the home, which could enable them to continue living in the current home and saving money each month by bringing in additional income. Some people do consider sale and rent back schemes, but many believe that at present these offer a raw deal as homeowners can often receive far less than the property is worth.
Personal loan rates have rocketed
October 7, 2010
Over the years many people have taken out personal loans for all sorts of reasons, and until the onset of the global financial crisis many people were able to low rate personal loans with relative ease, as lenders were keen to lend money and were offering tempting interest rates in order to try and entice borrowers and keep head of rival lenders.
However, the financial industry has changed radically over the past few years with the onset of the global financial crisis and the recession, and these days getting a personal loan is nowhere near as easy as it was. Lenders are now being far more restrictive when it comes to lending, and are extremely cautious over who they will lend to.
Another problem that borrowers now face when looking for a personal loan is the higher rates of interest that lenders are charging. Despite the fact that the base interest rate has now been at its all time low for nineteen months in a row, standing at just 0.5 percent, personal loan rates are said to have increased over the past couple of years.
Research was carried out recently by Sainsbury’s Finance, and officials from the firm said that it was becoming more and more difficult for UK consumers to get an affordable personal loan. The figures released following the research showed that since 2008 personal loan rates had increased by 17 percent.
According to the results the average personal loan interest rate in 2008 stood at 10.67 percent, even though the base rate was much higher than it is now. However, despite the base interest rate being at its all time low of 0.5 percent now, the average personal loan rate has now increased to 12.45 percent.
Young homeowners have few DIY skills
October 7, 2010
These days, with the property market still experiencing problems, many homeowners who may have been looking to sell their homes have found that the demand for property has dropped, which has reduced their chances of being able to secure a successful sale.
This has led to many people that may have given up on selling their homes for the moment deciding instead to try and renovate or improve their existing homes. However, with many experiencing financial difficulties in the current financial climate most cannot afford to shell out to have their homes improved by professionals.
One alternative for homeowners that want to make improvements is to do as much as they safely can using DIY. However, a recent survey has shown that younger homeowners today actually lack DIY skills, which reduces the chances of them being able to carry out improvements. Many were not even able to carry out what many would class as the most basic DIY tasks around the home, and would call on parents to help them out.
The survey was carried out by Swinton Insurance which questioned twelve hundred younger property owners all around the country. According to the results of the survey 18 percent of those polled could not put up shelves, and 22 percent were not able to wire a plug. Officials said that often older homeowners could do these basic tasks with ease but the skills had not been passed on to younger homeowners. Around 37 percent of those polled said that they would call on their dads to help them with DIY jobs.
Steve Chelton, insurance development manager at Swinton Insurance, said: “While it isn’t necessary to have great DIY skills, homeowners should know what they are doing before making any home repairs themselves.”