Posted in: Instalment Loans

Contact Comparing Instalment Loans to one off Payments

There are many different types of loans and they differ in a variety of ways. One difference between loans is the repayment terms. Some loans require you to repay the whole loan in one instalment whereas most loans will expect you to repay in smaller instalments over a period of months or even years. There are advantages and disadvantages to both methods and it is worth thinking about these so that you can decide which will suit you the best.

Cost of the Loan

Usually the loan costs increase the longer you hold the loan. This is because loan interest tends to be added on daily and so if you have the loan for more days then you will pay more interest. This is relevant to choosing between repaying in instalments or in a lump sum because if you repay in one lump sum, you will pay back the loan much more quickly and therefore it will usually be cheaper. It is worth calculating this though, just to be sure and it is god to know how much the loan will cost you anyway. If you are taking out a payday loan, it will have a calculator on the website which will let you know how much the loan will cost in total when you put in the amount that you want to borrow and when you will be repaying it. This is not always so obvious with other types of loans and so you may need to telephone the customer services to ask them the total repayment amount or the total cost of the loan, whichever you are comparing. You can calculate it, but this can be quite tricky and so it is easier to get the lender to do this for you. If interest rates were the same, then it would be obvious that taking longer to repay it would cost more. However, interest rates will vary between different loans and therefore a comparison is not that easy. You may be tempted to think that the lower interest rate will be the cheapest, but if you are paying back over a longer period, even at a lower rate, you could end up repaying more in interest than if you repay in a lump sum at a higher interest rate. There may also be other charges and fees which you pay separately to the interest which will change the cost and if you forget to add those into your calculations or you are not aware of them so do not put them in, it could mean that you get an incorrect answer. Whereas if you phone up and explain how much you want to borrow and how long for and ask how much in total you will have to repay, you should be able to get a straight answer that you can use for comparing.

Size of the Repayment

If you repay in instalments, it is likely that you will repay smaller amounts than if you repay in a lump sum. This could make a big difference to how you cope with that repayment and how you cope afterwards. Paying back a big lump sum may mean that you suddenly have a significant chunk of money removed from your bank account meaning that you may find it hard to cover the rest of your bills or to buy essentials such as food for the rest of the month. However, if you repay in smaller instalments, you will be spreading the cost for longer meaning that it will be easier for you to manage the repayments as well as the rest of your expenses.

If you feel that you could easily manage a lump sum repayment this may not be an issue for you, but it is important to think about how you normally manage. Consider whether you tend to struggle to pay everything each month or whether you have spare money available. If you do have spare money, would it normally be enough to cover a large repayment or do you feel that you would struggle? If you are not sure, then look back at past bank statements to see how you have managed in the last few months; look at how much you had left at the end of the month and see whether it would have been enough to cover a loan repayment.

Stress of the Loan

It is also important to think about how stressful you may find a loan. Some people feel that just being in debt is a big burden and they want to get out of it as soon as possible. This can mean that paying it off more quickly, could be the best option as the stress will disappear more quickly. However, if this then causes you to struggle financially, then it could create even more stress.

If you have had a loan before you will be able to know how much stress a loan is likely to cause you and compare this by stress caused by having to cope with less money. You will be likely to know how much stress you feel when struggling to make ends meet and this may be less than that caused by having a loan or it could be more. Only you will be able to be the judge of this. It can be difficult to know for sure, but you should be able to use past experience as a guide and have some sort of idea as to which situation will be the easiest for you to be able to cope with.

Conclusion

There are lots of things to consider when you are looking at borrowing money and repayments is just one of them. It is an important factor though and well worth considering. You need to consider the cost differences between paying back in one or several instalments as well as how well you will be able to cope with the amount you have to repay. You also should think about how these will impact your stress levels.

Posted in: Guarantor Loans

Should you sign a Guarantor Loan for your Friend?

If a friend approaches you and asks you to be a guarantor on a loan for them, you may have trouble deciding what to say. It is worth knowing more about what a guarantor loan is, the consequences of being a guarantor and how your decision might impact your friendship, before you make up your mind.

What is a guarantor loan?

A guarantor loan is designed for borrowers who have a poor credit record and therefore cannot get a standard loan. Instead of looking at the credit record of the borrower, the lender will allow the borrower to pick a person that will act as a guarantor and their credit record is looked at instead. The guarantor will be there to pay any outstanding debts that the borrower cannot manage including late payment fees and things like that.

This can therefore be a way for someone to borrow money that may not have any other means of doing so. The loans tend to be for thousands of pounds and therefore a significant amount of money which could cover costs of home repairs, buying a car or things like this, that people often have to borrow for. The loans are more expensive than a standard personal loan as the lender still considers them to be risky, due to the poor credit record of the borrower, despite the fact that the guarantor will make any missed payments.

What does a guarantor do?

A guarantor will have to prove their identity and provide proof of address and sign papers when the loan is taken out. Then if the borrower struggles with repayments, they will have to make those repayments on their behalf. It might be that the borrower has already missed payments for a few months before the guarantor is asked to pay and so there could be late repayment fees to pay as well.

The borrower has no obligation to repay any money to the guarantor. So if they pay a few, a lot or all repayments on the loan; it is up to the guarantor and the borrower to come up with an agreement as to whether the guarantor will be compensated for what they had to pay out. Legally they will not have to repay anything to the guarantor but the two may come up with an agreement between them. As a guarantor, it is wise to imagine that worst case scenario, where all repayments are made by the guarantor and consider what you would expect the borrower to do with regards to repaying you, in this circumstance. Then you should discuss this with the borrower before signing up to anything so you both understand the terms of your agreement. It would be wise to have a written copy of this, signed and witnessed by other people, so that if there is any disagreement as to what you agreed to at the beginning, then it is all written down for you to see.

The impact of being a guarantor

It is also worth thinking of the impact that being a guarantor might have on your own finances and credit rating as well as your relationship with the borrower. It is good to consider how much the total cost of the loan could be and what an impact it would have on you if you had to repay all of it. Although this is unlikely, it is best to plan for the worst just in case. Start by finding out form the lender how much will have to be repaid in total, including the interest so you have a figure to work with. Then consider where you would get the money from and how you would manage without that money. It may be that you have enough savings to cover it, your monthly pay would cover repayments or something else. Do make sure that you would have enough.

Having any loan has an impact on your credit rating. It will show on there that you are a guarantor This could have an impact on how easy it would be for to borrow in the future or while this current loan is still outstanding. It may also change your credit rating if the loan was not repaid on time.

Lastly you need to consider your relationship with the borrower. You could potentially be lending or giving them a large chunk of money and this could lead to problems between you. It could be that they will expect you to lend to them again or act as a guarantor on a future loan and you may not be prepared to do it again. It may be that they are not able to pay you back any repayments that you have had to make for them and this could make things strained between you if you need the money or want it for something specific. It may even cause problems with other friends if they find out and expect you to help them out in a similar way.

Conclusion

So although being a guarantor sounds like a nice things to do in order to help out a friend, it can be more complicated than it seems. You want to not only protect your friendship but also your finances as well. Turning them down, may make things difficult between you, but it could be even more difficult if you end up paying out a lot of money for them and do not get it back. Therefore it is a decision that you should think really hard about and consider the impact on everyone around you of doing it. There is also a cost issue in that it would be cheaper for you to get a loan and them make the repayments as you could one at a lower rate than they could or if you have enough savings you give them the money and they repay when they can. It is worth thinking about all of the options as well as the consequences of them.

Posted in: Personal Loans

What Should you use a Personal Loan for?

A personal loan is usually given out by a bank or building society and they tend not to ask what you are spending the money on. This means that it is up to you as to what you use the loan for. However, it is sensible to think through why you are getting the loan and what you are spending it on, to make sure that you are making the right decision. There are a number of reasons why you should do this.

Cost

A loan will always cost money. You will be charged by the lender for the loan and so it is worth making sure that you really need it. Think about the item that you are buying with the loan and whether you can wait to buy it, perhaps you will be able to save up the money to buy or are expecting to be better off in the future. Think about whether it is necessary for you to buy the item at all or whether you can do without it entirely.

This decision is not as easy as it may seem. If you had to make for someone else, you may say that an item that is a luxury should not be bought at all or you should save up for it so that it is not unnecessarily expensive. Then you might say that if it is necessary and you cannot afford it or wait, then you should take the loan. Although this seems like the logical and sensible approach, there are problems with it. Firstly, judging whether something is necessary or just a luxury is not easy. Sometimes it is clear cut, so buying new cushions to replace some that are perfectly good but just out of fashion would be considered by most to be a luxury whereas paying for a roof repair on a house that is leaking rain water would be considered to be necessary. However, most spending decision that we make are not that easy to slot into a category. For example, is paying for your child’s birthday party a luxury? Well yes, it is a luxury, but if their sibling has had one and their friends have one and they really want one, then the decision is more difficult. Not only does it feel unfair for them to miss out, you have an emotional attachment to the recipient of the party which is stronger than logic.

Right loan type

It is important to choose the right loan type depending on what you are borrowing for. You would not use a personal loan, to buy a house, for example and so you just need to check that it is the most appropriate way to borrow. Some loans, such as student loans, have specific purposes and so you would need to check if one of those would be more appropriate. It is also important to think about the amount of money that you need to borrow. Personal loans tend to be for thousands of pounds and although it can be great to think that you would be getting this much money, you need to consider whether it is too much. Lenders like to lend more money as they acan get more interest if they do. You need to think about how much you need and borrow the least possible, to keep your costs down to a minimum. Therefore a loan that lends less money, such as a credit card, could be a better option. It is worth comparing the prices of different ways to borrow, to see which would be the cheapest for you. Ensure that you compare to total cost of the loan over the time you have it so that you can do a fair comparison of the cost.

Useful repayment term

When considering whether a personal loan is the right type of loan for your needs, you also need to compare the repayment term. This refers to how long it takes to repay the loan. The longer you have a loan for, the more expensive it will get as interest is charged per day of borrowing. However, if you have to repay it all in a very short space of time, it may be hard for you to find the money that is needed and to manage your other bills as well as repay this loan. Therefore it can sometime sbe better to pay more money to repay over a longer period of time so that you can more easily manage your finances. You do not want to risk missing repayments as this can make things even more expensive for you as you will have late repayment fees alongside the interest to pay. There are also future consequences of missing repayments in that you will have it noted on your credit record and it could make it harder for you to borrow money in the future.

Conclusion

So it is not really about choosing whether you are spending your loan on the right things, but worth considering whether you have right loan or whether you even need a loan. It is really important to get his right as it can have a big impact on your future with regards to repaying and the costs and consequences of doing so as well as borrowing in the future. Therefore never borrow money without thinking hard about the decision and making sure that you are making the right for you in your current circumstances. Try to step back and evaluate the decision without being emotionally tied to it. This can be hard, so get help from friends and family and they may be able to see things differently to you. Try to ask those that have a good record with money as they are obviously doing something right for themselves and could hopefully pass that on to you. They may be able to help you to see not only whether borrowing is the right thing for you to do but also which loan would be the right type to help you.