Loans – Focus Mag (original) (raw)

There are lots of people that will borrow money in order to do things. This means that they will take out a loan of some sort so that they can buy items, it might be something large like a house or car or to cover an emergency such as replacing a white good. There are lots of reasons for borrowing, lots of types of loans and many different lenders. Whatever your financial situation, you may wonder whether borrowing is the right thing for you to do. It is good to think it through and then decide what types of loans might be available.

Borrowing on Benefits – pros and cons.

There are lots of different types of benefits and many people on benefits are also working, it might be that they have an income top-up or they have children and get money for them. There are some people though, who are on benefits and do not work. Either way, they will both have a regular income and this will mean that there is a possibility that they will be able to borrow money. There are advantages and disadvantages to all types of borrowing and when you are on benefits there are things that you will need to consider in addition to the factors those not on benefits will need to think about.

In addition to the above, you will need to make sure that you will be able to repay the loan. Every loan is set up slightly differently but you will have to repay the loan plus interest and possibly charges and you will either have to repay that all at once on a particular date or in instalments. It is really important to make sure that you are aware of the repayment terms and that you work out whether you will be able to afford those repayments. It is important to be aware of the income that you have and what you normally spend it on and then you will be able to work out whether you will have anything left for a loan repayment and how much you will be able to afford. It is also well worth considering the fact that interest rates are likely to rise in the future. This will mean that your loan repayments could go up, particularly if you are on a variable rate, which can be changed at any time by your lender. So think about whether you will be able to afford this increase and if not, whether there might be ab area where you can cut back, that will enable you to free up some money to cover this.

The advantages of borrowing are that you will be able to have a sum of money available to you, that you will be able to spend on something that you need or want. It can be very useful to be able to replace broken things or enjoy new things. It is something that many people do and having new things can be very useful as well as lots of fun. If you are on a limited income, it could be the only way that you will be able to afford expensive things as borrowing will allow you to be able to spread the repayments and make it easier for you to be able to afford.

What Loans will be available?

You may think that if you are on benefits there will be no loans available to you. However, lenders like to lend out money as they profit from it and this means that it can be relatively easy to borrow. However, the more money you want the harder it will get. It can be relatively easy to get an overdraft of a few hundred pounds, but if you want a mortgage on a house, you will find it more difficult to secure the mortgage that you will need.

Payday Loan

The most common loans that people choose because they are easy to arrange are payday loans. These tend to be available to everyone, regardless of their income amount and source and that means that even if you have an income made up completely of benefits, you will be able to borrow. However, it is worth knowing that these loans are very expensive. This is because the lenders are taking on a big risk when they lend as they are happy to lend to anyone. This means the people borrowing may not repay the loan and therefore they may lose out. They charge lots of money to everyone, so that they can get enough to cover those that do not pay. It is therefore good to look at the costs of the loans that you are considering too. Think about whether you think the cost will really be worth it. This will very much depend on what you need to loan for and how much you are willing to pay for it. If you have to replace a broken fridge then you may be happy to use this type of loan and pay the extra costs, so that you can keep food cool, however, if you are using the money for a holiday, you may feel it is better to wait and save up rather than pay the extra loan costs as well.

Guarantor Loan

You may find that there will be other loans available to consider as well. You might be able to get a guarantor loan. This is where you nominate someone, who has a good credit record, who will repay the loan for you, if you struggle. These loans tend to be for thousands of pounds and so you will be able to use them for significant purchases. It does depend on you being able to find someone that will be able to repay the loan and will be willing to sign the paperwork etc. You will also find that these are still quite costly loans and so you need to be fully aware of how much you will have to pay and think about whether you are happy to pay out that amount of money.

Logbook Loan

This is a type of loan where you use your car as collateral. It means that if you do not manage the loan repayments then your car will be taken and sold to repay what you owe. This could be a very risky loan to have if you rely on your car to drive you to work, take children to school or visit friends and family. You will therefore need to make sure that you are completely confident that you will be able to repay the loan in full and on time so that you do not lose your vehicle.

Conventional Loans

You may find that you will still be able to use conventional loans such as personal loans, overdrafts, credit cards etc. It is well worth having a chat to your bank about it and seeing what they will be willing to do to help you. These types of loans tend to be cheaper and less risky and so they are the place that you should turn to first. You will still need to be aware of the costs and decide whether you think that they are worth it. You will also need to make sure that you are aware of how much you will need to repay and whether you will be able to afford this amount. There will still be consequences if you miss repayments, such as charges and even court cases and it will appear on your credit report which means that it will be harder for you to get other loans as a result. The costs may not be as high compared with payday, guarantor and logbook loans, but there are still costs and you will need to pay them.

Managing Without a Loan

It is a good idea to do your best to manage without a loan if you can. There will always be risks and cost with any sort of loan and these are best avoided if you can. If possible, it is wise to try to save a little money each month. You will then be able to use this if you need to buy something a bit extra. This can be tricky, but no more difficult than finding the money for loan repayments and it is much better to save and have the money there when you need it, rather than suddenly finding you need money and not knowing what to do to get it. Loans can be useful in emergencies and in most cases, this is what they should be limited to. If you want to buy a home, that is an exception where a mortgage can be very useful, but the benefits of not paying any rent into your later life and retirement, far outweigh the costs of the loan. Most loans do not offer this sort of advantage.

It is therefore worth thinking hard before getting a loan and deciding whether it really is worthwhile for you. Consider the advantages and disadvantages. Think about what you will buy and the cost of the loan as well as the risks and whether it really will be worth it for you. Make sure that you will have enough money to repay the loan and consider what you might be able to do, if you cannot repay it. Once you have all of this information, you will be able to make an informed decision as to whether you think the loan is a good idea. It can be an emotional decision to make and therefore worth talking over with other people who may see things slightly differently to you and will therefore help you make the right decision.

There are lots of different types of loans and they work differently. Some are more common than others and some have been around a long time and others are new. This means that it is not always easy to work out which ones might be the best ones to take out. A payday loan is a type of loan that you may be less likely to know much about and so it is a good idea to investigate it. If you are looking to borrow money, it is wise to know all about the options available to you before you decide which loan to take as you will then know that you are using the best one for you. A payday loan has a few main features that make it stand out from other loans and it is worth knowing what these are so that you can decide whether it will be a good loan for you.

Borrow Small Amounts of Money

With a payday loan you will be lent up to £1,000. The amount that you can borrow will be small if you have never had a payday loan before and if you take out a second, then you may be able to borrow more money, if you repaid the first one on time. This is the way that the payday lenders build up trust and so you may only be able to borrow a few hundred pounds the first time you use them, although this will vary between lenders. Some people like the idea of only borrowing a small amount of money though. It feels much more manageable and less stressful if you only have a small amount of money to repay. It may also be all that you need, if you only need to repay a small bill or need it to buy something fairly cheap. Of course, if you need a lot of money then this will not be the right sort of loan for you.

Pay Back Quickly

With a payday loan you will only have the loan for a few weeks. This is because the idea of this sort of loan is to give you some money to keep you going until you next get paid. So, on the day that you are paid, the repayment will automatically be removed from your bank and you repay everything you owe in one lump sum. You will have to set up a direct debit payment for this, which means that you will not forget to pay it. Paying back quickly means that you will not have the loan for very long. This is a great thing for those people that do not like the idea of being in debt. They will not owe money for very long and they will therefore not feel stressed about being in debt for very long either.

No Credit Check

There is no credit check done when you take out a payday loan. This means that if you have a poor credit record and you cannot get a loan with any other company, you will still be able to get out a payday loan. So, you will be able to borrow money, if you have an emergency and need money. It is worth noting though, that payday loans are expensive. This is because the lenders take on a big risk by lending money to those with a poor credit record, who may struggle to repay it. It is really important to make sure that you are completely aware of how much the loan will cost you and you will therefore be able to decide whether you think that it is worth it.

Risk

There is a larger risk with this sort of loan. This is because it is offered to people who have a poor credit record. It is an expensive way to borrow and so if you have a good credit record you would be better off using a cheaper loan such as a credit card or overdraft. If you do have a poor credit record, then this could be because you have struggled with loan repayments before. This is then risky, because if you have struggled before you may struggle again. Even though the loan repayment goes out on the day you are paid, it does not mean you will be able to repay it. It could be that you have other payments going out on that day or that your pay will be absorbed by an overdraft and then you will not have enough. So, make sure that it is a loan that you should be taking out. As with all loans, look at the alternatives and see whether you have other borrowing options. It is also wise to make sure that you really need to borrow the money. These loans are meant for emergencies and if you can wait a little while then try to do that and use your pay instead of borrowing. If it is a bill you need to pay, you might be able to speak to the company and explain that you will pay them when you get paid, if it is an item you need to buy, you may be able to just hold on for a little longer.

These are the main things to consider when you are thinking about this sort of loan. It is a good idea to make sure you have a full understanding of the terms and conditions though, as they will vary between lenders and you need to be fully aware of how the loan works before you take one out. You need to be completely sure that you are able to repay it as well, so that you can take the loan out in confidence and know that you will not have to pay out any more fees than necessary as late repayments can be very costly.