Loans

How to Repay Loans with Ease

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Many of us have loans and they can be very useful. We can take them out in all sorts of different forms form mortgages to credit cards and for lots of different amounts and different purposes. They can help us to afford to do a degree, buy a home or to go on holiday but sometimes they can be a source of concern because we have to find the money to repay them. Some people find this easier than others. There is no need for repayment to be tricky though as long as you follow some rules.

  • Check repayments before you take out loan – it is really important to completely aware of how much you will need to repay when you get the loan. Knowing how much you will need to repay each month will allow you to be able to calculate whether this is something that you will be able to afford. You will need to take a look at your own finances and work out whether you would normally have enough money so that you can work out whether you will be able to afford them. It might be that you will have to come up with some sort of strategy so that you can afford them more easily. You might have to adjust the things that you are spending money on, which could be easier for some people than others. You may also need to think of ways to increase your income as well. It is really important to think about all of this before you take out the loan. Get a plan and make sure that you have got everything in order before you borrow any money. Then you will be able to be completely confident that you will be able to afford those repayments
  • Plan for interest rate rises – if you have a loan with a variable rate then you will have to pay more money if the interest rate goes up. It can be tempting to just hope that it will not, particularly if you have a very short-term loan, but it is wise to be prepared just in case. Calculate how much your payments might go up if interest rates do go up and this will help you to work out whether you will be able to cope with this. Bear in mind that if you have other loans, such as a mortgage, you will also have to find the extra money to pay for those as well. It is therefore wise to imagine what you might do. It could be that you spend money on something such as a magazine subscription, that you could give up if necessary but do not want to unless you have to. Just identify something that you can do and then you will be able to cope.
  • Prioritise repayments – it is really important to make sure that when you are paying for things that your prioritise making your loan repayments. To make that easier see whether you can have the payments go out of your account by direct debit just after you are paid. Then you will be sure that there is the money there for you when you need it. Also make sure that you do not spend too much the previous month that you go overdrawn as if you have too much of an overdraft your salary may be absorbed by that and there may not be enough left to pay the loan repayments.
  • Ensure luxury spending is kept on track – it is wise that you are careful with what you are buying. We all buy necessities and luxuries and it is wise to make sure that we do not buy too many luxuries. It is good to stay within our means with regards to spending but even better to have some money left over each month so that we can build up some savings. The reason for this is that it is really handy to have a bit of money to fall back on. If we have this then it gives us a feeling of security and if interest rates do go up we will know that we will have some money just in case we find it difficult to manage that increase in costs.
  • Overpay if you can – the priority with loans should always be to make sure that you can repay what is expected of you. However, you can reduce the cost of a loan by paying back a bit extra. Some lenders will charge you extra money if you wish to do this, so you need to check. It could be the case that you will be able to save money by repaying a bit extra every so often. It will mean that your interest charges will be lower and so the loan will be cheaper than if you just paid back the minimum expected.
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Advice

Where to put your Money to Keep it Safe

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There are a lot of people these days that worry about where they should be putting their money in case they lose it. This is something which it is right to be concerned about because losing money could put you in a very difficult situation. There are things that you can do, which will reduce the risk of you losing your money.

Investment versus savings

If people have a lot of spare money then they may invest it in things like stocks and shares. This can give a good return but it is risky. If money is put in a savings account the risks are much lower but the return is also much lower. It is important to understand the differences between savings and investments and then you can decide which will be best for you. When you take out an investment you are buying something with your money and hoping that it will increase in value. This could be anything from a painting or a home to a share of a company. There is a risk that the items that you buy could decrease in value and this could mean that when you want to get your money back and sell those items, you will actually get back less than you paid in. You may also have charges for certain investments, such as money that goes to a fund manager when you buy shares. This could reduce what you get back and may make it more likely that you will not make anything. Normally investments will go up and down in value in the short term but over the long term they are more likely to average out an increase in value. This means that you will need to think about only getting investments if you are going to be able to keep your money in them for a long time as that will secure it better and it is more likely to be safe. Choosing the right investment or the right fund manager can also make a difference but this is not easy to do.

With a savings account you are lending a bank or building society your money. They will then be able to give you a small amount of interest on it. You will be able to get more money if you tie it up for longer, perhaps buying bonds or using a notice account as this will pay out more in interest.

Safe financial institutions

It is understandable that people also want to make sure that they are putting their money in a place that can be trusted. This means that they might want to find out about the reputation of the lender before they hand over any money. It is worth knowing that legally you can get some protection. If the financial institution you are with is UK regulated then you will be covered by the Financial Services Compensation Scheme and you will be able to get protection for your money up to £85,000 per institution, which means if the bank fails you will still get up to £85,000 back under this scheme. Not all financial institutions in the UK are covered in this scheme so you need to check. Also if you have £100,000 spread across several accounts with the same bank, you will only get £85,000 back likewise if you have the money with more than one institution but they trade under the same umbrella such as Halifax and Bank of Scotland. If you have a joint account then you will get twice the cover as you get the £85,000 each.

Spreading the risk

It can also be wise to spread the risk in a number of ways. As explained above if you have a lot of money then spreading it between different financial institutions can be worth it. Even if you have a smaller amount it can be good as well. If the institution does fail, then it will take a while for you to get your money back so having some elsewhere can be handy. You will also find that different places offer different interest rates or if you are investing have different returns and so putting your money with several can help to spread that risk and if one does badly it may be that the other one does not. If you put all of your money into one investment, for example, and it goes down in value significantly, you will lose a lot, but if you put it in several and one loses money, hopefully the others will gain and cancel out that loss. Investment is a risky business anyway and you will need to decide whether you are willing to take that risk or whether you would rather have a lower return but know that the money will be safer.

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