We thought it a good time to look at the basics of borrowing. For many it is almost a dirty word, because it involves going into debt. But virtually all of us do it, repeatedly too, so we decided to examine what is involved. And also the options you may choose in a crowded market. We look at the basics of borrowing.
The stigma involved with borrowing is linked to going into debt. In a perfect world, we would never take on debt. We would spend what we already possessed, and that would be great. But that is not reality. For the select few, with considerable wealth, borrowing is not necessary. But even huge corporations borrow, for example for property projects. Governments borrow. The UK debt is currently approaching £2 trillion! And football clubs can win trophy after trophy whilst accumulating huge levels of debt. Just look at Barcelona, who owe almost £1 billion. Lenders have lent for thousands of years, and thus also people have borrowed money. In the right conditions, it makes sense.
The basics of borrowing should be ultra simple. Decide if you have to borrow. Ensure that there is not another option, such as selling off non-necessary assets, or making savings. If borrowing is definitely for you, see what deals are available. Do the maths and be sure of two things. That you accept the total interest payable and thus think the loan is worthwhile. and secondly, and even more importantly, that you are sure you can make repayments on time each month. And that you can do this without sacrifices.
There’s quite a range of borrowing products available to people aged 18 and over. you will discover a crowded market, with multiple options for each methods, and many methods. Ensure you are aware of terms and conditions before committing. There will be interest charges, and there may be an initial fee too. Failure to make repayments will lead to further charges. You should be a UK resident, over 18 and have a regular income. Do not borrow if not, or attempt to. Annual percentage rates (APRs) are a good way to compare offers and deals, but not the catch-all solution. Work out total repayable amounts to see which is best. There is always the danger of hidden fees or charges, plus variable rates with some offers.
What Moolr help source for our customers. This is usually a fixed amount, borrowed over an agreed period of time. You repay it in instalments, usually monthly. This can be one of the cheaper forms of borrowing but there might be both a minimum amount you can borrow and length of time you have to pay back the loan so it might not suit everyone. Check whether the interest rate could go up and whether it will cost you more if you are new to credit or have a poor credit history. These loans can be for a wide range of amounts, with variable repayment periods. From 1 month to 5 years. No assets are at risk if you take out an unsecured loan. A secured loan uses an asset – a mortgage is a secured loan.
A common safety net for many of us. You will know what they are, a facility to go into debt in your bank account. You will have a prearranged overdraft limit, so it is important you do not go over it. also be wary that the rules are changing in April 2020. Interest rates are becoming more uniform and much higher, approaching 40% for many banks. Fees may reduce as a consequence, but it is vital you check out your terms. Using an overdraft facility could become very expensive in the future. That depends on your bank though and what they offer.
A great facility when used correctly. Credit cards come in all colours, shapes and sizes. And what the companies offer is variable. Use one that suits your needs. That may be zero per cent on purchases, or a free balance transfer offer. Just ensure you pay off your balance before offers expire. Credit card companies make much of their money form those that pay big interest fees after the offers expire, because they cannot pay off what they owe.
Community savings and loan cooperatives, where members pool their savings to lend to one another and help to run the credit union. A cooperative is an organisation which is owned by and run for the benefit of the members who use its services. Interest rates can vary up to a legal maximum of 3% per month (42.6% APR).