Loans and Mortgages
Tips On How To Save Money On Your Personal Loan
1-You may not always get the advertised typical APR on a Personal Loan, you may be given a different rate due to your credit rating. So remember to always check this before applying for a personal loan.
2-Early repayment penalties can add to the cost of your personal loan. Paying off your personal loan early can save you money in interest, however some personal loan providers charge you an early redemption fee, so always check this before hand.
3-Payment breaks add to the cost of the personal loan. Interest is charged during this payment break period, adding to the total interest payable.
4-Steer clear of unnecessary charges.Some personal loan lenders offer a same day fund facility. This allows you to withdraw your money on the same day you complete your application. However there is a fee for this service and sometimes it can be as much as £50!
5- Always pay on time. For many personal loan policies a direct debit will be set up to make monthly installments to pay back the loan. So always make sure you have enough money in your current account to make the payment. Charges for missed payments can sometimes be as a high as £38.
6-You don’t always need to take out Payment Protection Insurance. When taking out a personal loan your provider may offer you Payment Protection Insurance (PPI). So if you find that you are unable to work due to an accident or sickness, then your PPI will pay a percentage of your bill. However PPI can be expensive, so think carefully before you take it. Make sure it suits your circumstances, and think about how much money you could be wasting. You do not have to take it, and you can take it out separately if you find you need one.
7-Be careful with secured loans. Secured loans tend to have variable rates, meaning the lender can increase your payments when it likes. It also is a secured loan, secured to your house, so if you find you can’t repay then the lender can repossess your home. Most unsecured personal loans are at a fixed rate, so you’ll always know what you’re paying and it won’t change.
8-Borrow less and save more.Borrowing money over a long period of time may decrease your monthly repayments but it greatly increases the interest you repay. For many it’s better to borrow as little as possible and repay it back as quickly as possible.
Advantages and Disadvantages of secured loans:
Advantages:
-Your monthly repayments can be lowered by spreading them over a longer period of time (be aware that while this can be advantageous in the short term it could mean you actually repay more in total interest over a longer period).
- Changing your mortgage to raise extra funds could mean facing large early repayment charges, taking out a secured loan can help to avoid this.
-A secured loan can be used for any purpose as long as it is legal, raising extra funds via a re-mortgage may have usage restrictions.
-You are able to borrow more money
-You can spread repayments over a longer period of time.
Disadvantages:
-The interest rates on secured loans will be higher than for a mortgage.
-Paying off your secured loan each month might leave you short of cash to meet other bills.
-The upfront costs such as valuation fees and arrangement fees will increase your expenditure
Advantages and Disadvantages of Unsecured Loans:
Advantages:
-Probably the main reason why individuals opt for such loan coverage is because loans promise a sum of money in a shorter period of time. What they’re unaware of is the elevated interest rates that will make them liable to pay under such coverage.
-Another advantage of an unsecured loan is the time factor involved. Most Unsecured Loans guarantee a large amount of cash to their customers within 24 hours or less.
-Unsecured loans can be tailored to suit the various financial needs of its borrowers.
Disadvantages:
- A major disadvantage behind Unsecured Loans is low credit histories. Homeowners with low credit histories stand fewer chances of being granted such loan coverage. This is a major disadvantage.
90% of lenders, both among the online and online community, will most likely reject applications from such individuals. This is simply because the individual has not secured anything whatsoever against the amount of the loan. Hence, lenders feel that they are at major risk of not receiving any repayment of the loan amount in the near future.
-You have to return the loan within the set payback period. This payback period is set by the lender.
-You are required to pay the loan in pre-decided time frame. If you want to pay your unsecured loan before the set time period, you will have to pay an early repayment fine.
When considering the possibility of taking ou t a secured loan it is important to weigh up both the pros and cons to make sure you reach the right decision. If there is any doubt in your mind the best course of action is to speak with an independent financial advisor to discuss your options.
How to save money on your mortgage
Can overpaying your mortgage save you money?
The answer is Yes and No.
For many it can save you money. For example, say you have a £100,000 mortgage taken out over a 25 year period, with an interest rate of 6%. Overpaying by £100 a month could save you a healthy £27,039.27, as well as knocking more than six years off the life of your mortgage!
However, with some lenders there is a minimum amount you are allowed to overpay. If you pay in less than this, your money sits in the lender’s coffers until the end of its financial year, which means you are giving it an interest-free loan.
If you pay more than the minimum, your interest bills will be recalculated from the following month.
Some firms offer flexible or offset mortgages that recalculate your balance daily. The effect is to help you get rid of your loan faster and people can take advantage of this by paying more off each month. However, although many high street lenders have given normal flexible features some set minimum or maximum amounts you can overpay.
If you are on a special fixed or discounted rate deal you may have to pay an early redemption penalty, and this can stretch for years even after the special deal is over.
It is not wise to repay your mortgage if you have heavy credit card debts on regular and high APR’s. It doesn’t make sense to repay a mortgage at 6% if you have a credit card debt where you can be paying 15%-20%.
