Three Steps to Cheaper Borrowing

CashBorrowing money, when approached carefully, can be a useful way to get access to money you need but currently don’t have to hand. The downside, of course, is that you will pay interest and ultimately repay more than you borrow.

Naturally, when borrowing you will want to keep the interest as low as possible and generally minimise the amount you repay. Three simple steps can do a lot to help make your loan as cheap as possible.

Shop Around

Shopping around is arguably more important today than it has ever been. This is true of many products, and loans are among them. Countless providers in fierce competition introduce a vast array of deals, and the internet makes comparing those deals quicker and easier than ever. Don’t just head to one lender – even one you’ve been reliably told has reasonable rates – and accept what they offer you. Make sure to look at comparable loans elsewhere to locate the best rates. Make sure you understand the costs in full, though. Are there any charges besides interest, such as early repayment charges if you shift your debt early?

As well as checking out different providers, it is well worth checking out different types of finance. It is surprising how far some types of credit overlap and how different their charges could be. To take an extreme example, if you have a reasonably good credit score and only want to borrow a few hundred pounds for a short time, there is no point resorting to high-interest and risky payday loans (which are rarely if ever advisable) when you might be able to take out a credit card with 0% on purchases and a sufficient spending limit.

Borrow More

This one seems counterintuitive, and only works in quite specific circumstances, but it is definitely worth checking before you take out your loan. Loan providers usually offer better rates for bigger loans, and there are very distinct cut-off points between the different rates. If the amount you want to borrow is close to the threshold, then borrowing a little more could result in a lower rate that ultimately saves you money.

For instance, a good but attainable interest rate for a £2750 loan over five years at present would be around 15%. Boost your borrowing to £3000, and with a little luck and a fair credit history you could get under 8%. The latter will see you pay back under £3650, compared to just over £3925 with the former. In other words, borrowing £250 more will see you pay back nearly £300 less in total.

Repay Early

Once you have your loan, the best way to keep the interest down is simply to repay early. You should do this if at all possible, as the difference can be very significant (though beware of any early repayment penalties that could offset some of the benefits).

Pay above the minimum each month if you can in order to shift your debt early. Aside from some money “for a rainy day” it is better to put money towards your debt than into a savings account due to the disparity in interest rates, so while you may not like parting with extra money in the short term you will be better off once the loan has been cleared.

Building an Effective Financial Buffer

A financial buffer is a sum of money you have put by “for a rainy day.” In other words, it is money you have to ensure that any sudden or unexpected problems will not leave you struggling financially. Examples of the kind of disaster that your financial buffer can protect against include repairing or replacing your car after a breakdown or expensive work that needs to be carried out on your home.

Building up an effective financial buffer that will be enough to protect you from all manner of disasters can seem difficult when finances are already tight. However, a few steps can help you put together the best buffer possible.

Gathering Funds

Even if your finances are tight, it is a good idea to put what you can aside to form a financial buffer. Otherwise, if any unexpected expenses do arrive, you could find yourself in a very difficult situation. If you don’t have much to spare, it is a good idea to build up your buffer slowly through regular contributions. Work out what you can spare each month, and put this into your bank account to form part of your buffer. Ideally, this should be a fixed regular amount. However, if your income is variable you may have to work out just how much you are able to put aside on a month-by-month basis.

The Role of Debt

Usually, it is not a good idea to build up any savings while you are in debt. The amount you gain from savings will be outweighed by the amount you lose from accruing interest on your debt. However, financial buffers form the exception to this rule. It is a good idea to put a little aside if you can just in case of an emergency rather than putting every penny towards your debt. However, do not forget that meeting at least your minimum repayments takes priority if you find yourself in the unfortunate situation of having to choose.

Where to put It

If you are lucky, you will not need your financial buffer for any emergencies and it will end up just being savings for the future. However, it is different from other kinds of saving. You may need to access it at short notice, so as tempting as it can be to boost your buffer with high interest rates you should not tie it up in any account that makes access difficult. Place it into an easy access savings account with online banking so you can near-instantly return it to your current account if needed. Alternatively, consider putting it into a high-interest current account if you can meet the conditions. This will make it readily accessible on your debit card, and may give better interest than easy-access savings accounts.

Making a New Car More Affordable

Car PurchaseThere are a number of reasons you need a new car. Maybe it is your first car, or maybe you are upgrading to something that better suits your needs. You may simply fancy a change, or your trusty old warhorse may have finally given up the ghost and would cost more to repair than to replace. Whatever the case, a new car can be an expensive purchase. However, there are a number of ways you can make it more manageable.

Look Around

If you can afford to take your time, then shop around for the best deal. If you need the car urgently, then at least check out multiple garages and, assuming you are looking at second hand vehicles, private sellers. Not only will this let you get the best deal in terms of financial outlay, but could potentially mean you get a better car for your money which could be hugely beneficial in the long run.

Consider All Finance Options

If you need to buy a car on finance, don’t just accept the dealer’s finance options. There are multiple alternatives out there when it comes to financing your new car purchase. Third party car loan providers, or personal loans not specially designed for cars, may offer better rates. This may also make it possible to effectively buy a car from a private seller on finance, borrowing the money from your chosen lender and repaying it monthly as you would a dealer’s finance deal. However, it is true that dealer finance is sometimes more accessible.

Think About Fuel Economy

A car isn’t just a one-off cost but an ongoing one. Fuel economy will have a major impact on how much it costs to keep it on the road. Getting a car that gets more miles to the gallon could easily counteract a slightly higher initial price tag. Diesel cars offer better fuel economy than petrol ones, even when the higher cost of diesel fuel is considered, but cost more to buy when new. As such you will only benefit if you use the car a lot. When buying a used car, the price gap between petrol and diesel tends to be smaller so a diesel is more likely to be beneficial.


When you buy a new car, you will naturally be taking out a new insurance policy. Use comparison sites to find the best deal, and consider using a cashback website to bring the effective cost down. Cars can differ significantly in insurance costs, so if you are looking at more than one vehicle get some quotes online before making your choice. This will allow you to consider insurance cost differences when making your decision and potentially save money.

Is P2P a Good way to Borrow?

Peer-to-peer lending (P2P) has got a lot of attention recently and a number of headlines in the news. However, this has been driven by the announcement of plans to allow P2P loans to be placed into ISAs for tax-free returns, so most of the media coverage has focussed on the point of view of the lender. But what about taking out a peer-to-peer loan? Is the prospect as attractive for borrowers as it can be for lenders?

Who can Take out P2P Loans?

The question of who exactly is eligible to apply for a peer-to-peer loan depends very much on the provider. Some only cater to small businesses, while others also provide loans for individuals. They also have varying acceptance criteria. For example, some will only accept individuals with a very strong credit rating, while others will accept those who don’t have quite such a stellar history (albeit requiring higher rates to compensate their investors for the higher level of risk). If you don’t think you are eligible for one provider, don’t let that stop you looking for another that seems more appropriate.

Note, however, that most P2P loan providers require at least a fairly good credit history. You will also probably have to pass the lender’s own credit tests as well as being subjected to a traditional credit check through a third party credit referencing agency.

Advantages of P2P Loans

One of the advantages of taking out a P2P loan is that they tend to be more affordable.  P2P providers cut out many of the “middleman” activities that are present when taking out loans from banks and traditional lenders and they do not have the same expenses as other types of loan provider. As such, the rates they charge tend to be noticeably lower than you would get from other sources, especially if you are taking out a loan relatively short-term.

You may also have a better chance of successfully obtaining a loan, or of borrowing the full amount you require, from P2P lenders. There are several reasons for this. One is that, if your credit history is imperfect, you may be able to find investors who are willing to take on a small amount of extra risk for higher returns. The fact that the interest rate is also generally lower than when borrowing through a traditional bank somewhat lowers the chances you will struggle to repay, which could potentially help your case. On top of this, P2P lending offers greater flexibility as the funds for your loan could come from multiple people. If nobody is willing to lend you £10,000, there might be four people willing to contribute £2,500.

Choosing Your First Credit Card

Credit CardsUsed properly, credit cards can be a useful way to give yourself added financial freedom, cover large expenses, or plug the gap between an expense and your next wage payment without the need to resort to costly payday loans. They can also be a way for those with little or no credit history to build up their credit rating in a relatively simple and cost-effective way. However, if you have never had a credit card before it can be difficult to know which one to choose. The following are all things you may wish to consider in choosing your first card.

Specialist Credit Builder Cards

This type of card is well worth considering as a first credit card if you have little credit history. They are specifically designed for those with little or no past record as a borrower in order to build up a credit history and create a good rating. In other words, they are specifically aimed at those taking out a card for the first time. This means you have the best chance of getting accepted despite your lack of history, and are likely to receive a fairly good package for somebody who is, in the eyes of the lenders, an unknown quantity.

However, do not make the mistake of thinking that you will automatically fail to qualify for anything but a card that is specially designed for someone in your situation. It is still worth seeing whether you might be eligible for another card with slightly better terms, especially if you do have a little credit history with no particular bad marks. Be aware, though, that a declined application could form a bad point on your history. Some providers offer tools to help you check your eligibility without endangering your credit rating.

Cashback, Rewards and Incentives

Many cards offer incentives and rewards. These might take the form of cashback on purchases or a one-off gift upon taking out the card such as money, a gift voucher, or some desirable item. It can also be possible to obtain rewards for taking out a card from third parties. For example, it is possible to apply to many providers through cashback websites, earning cashback upon the approval of your application for a credit card. Be sure to look at rewards when shopping around. If two providers offer very similar packages but one offers a reward and the other doesn’t – or if one reward is simply more attractive than the other – it will probably seem like a no-brainer which one you choose.

The only thing to beware is letting an attractive reward tempt you towards a card that is otherwise not as good. This can sometimes be worthwhile, but you should be very sure that the reward will outweigh the drawbacks before you make this decision. There is no point accepting a cash reward or gift voucher, for example, if its value is likely to be wiped out by higher interest rates and charges.

The New ISAs

There are some significant changes that have happened with the Individual Savings Accounts (ISA) recently. The known ISAs are becoming New ISAs, or NISAs.


The changes

Every person in the UK who is 16 years old or over has an annual tax-free ISA allowance which can be held in cash, stocks and shares, or a combination. This allowance has now increased from a maximum of £11,880 to £15,000. Furthermore, the rules before said that you cannot have more than half of your ISA allowance in cash (which meant £5,940), while now you have the right to have the whole lot in cash if you want so.

What is more, the new rules expand the array of things you can do with your money. Previously it was not possible to transfer past stocks and shares ISAs into cash but you could only transfer past cash ISAs into stocks and shares. Now according to the new rules you are allowed to move your ISA money either way.

So in order to choose what to do with your ISA, you have several ways you can go. For example, if you want to save into a cash ISA, you have four options to choose from.

Easy access ISAs allow to withdraw your money whenever you want without any penalties. Usually these have different interest rates which can either go up or down. Some of them even come together with an introductory bonus that usually lasts for a year. The lowest interest rates usually go with these ISAs. If you give a sufficient notice, you can withdraw your money with a notice ISA and thus, you can get a slightly better rate. Also, there are regular saver ISAs which offer you better rather, however only for a year. There is a maximum amount you can save each month which is equivalent to a twelfth of your annual ISA allowance.

You can find the best rates offered by fixed rate ISAs. The deal with this kind of ISAs is that you lock your money away for a certain period of time and if you access it early you are going to be penalized with a loss of some or all of your interest.

When it comes to stocks and shares ISAs, you have a variety of investments to pick from, such as company shares, index tracker funds, managed funds and bonds.

Nevertheless, make sure you shop around for your ISA because there are many different platforms and stockbrokers.

Pension Reforms Introduced in Budget 2014

The Chancellor George Osborne introduced major changes to pension rule which mark which mark the biggest transformation to the taxation of pensions in almost a century. 

Pension rules are being eased and thus, it will be more stress-free for people to redeem smaller pension pots and will no longer be obliged to buy an annuity with their savings. These changes caused a serious fall in the share prices of the main pensions providers, reaching numbers like 8% to 13% down.


The Chancellor also initiated £20 million over the coming two years in order to develop a scheme providing advice with consumer groups and industry bodies. In other words what this means for people who are retiring is everyone who has a pension pot which could be used for purchasing an annuity will be eligible to receive a free and impartial face-to-face advice on the various options. This will also help people who are interested in buying an annuity to find the best possible deal for them.

Even though annuity rates have fallen by half over the last 15 years, most people still have little other options besides buying one. Some people thing that pension rules so far have shown a patronizing view that pensioners cannot be relied on with their own pension pots. Nevertheless, the Chancellor rejects this view and believes that hard-working people who have done the right thing all their lives need to be trusted with their own finances.

Most people who retire choose to buy an annuity with the money they have saved in their pension pot because this gives them a sense of security that they will have a fixed yearly income for the rest of their lives. However, in recent times there has been growing distrust with annuities because rates are falling and new deals are appearing all the time so sometimes staying with your existing pension provider might turn out non-beneficial.

However, the Government has announced that from this month people will be able to have a more flexible access to their savings.

Further changes include cuts in the amount of guaranteed income that  someone would need when he retires in order to access the so called flexible drawdown where you can draw off money from your pension pot. Currently, the sum has been £20, 000 per year while now after the changes it will be £12, 000 per year.

Therefore, Budget 2014 can be considered as bringing serious pension reforms. 

UK Households Plan To Cut Spending In 2014

According to Citizens Advice, more than half of the adults in the UK have stated that they plan to cut their spending in order to deal with the increasing household bills over 2014.

Statistics show that in general people are worried about the impact that higher bills can have on their finances and in order to minimize this negative impact, they are planning to cut spending.


Hence, the government, several charities and the energy industry have planned the so called Big Energy Saving Week in order to offer assistance to consumers how to take practical steps to make cuts on their bills.

Overall, the areas where people plan to cut spending are food, energy bills and leisure time with family and friends. Some people even consider moving into a cheaper home. It is a fact that many British households struggle with their bills and even those that manage to keep up with their costs, face difficult periods from time to time. Some people have used overdrafts in order to pay their energy bills or have borrowed money from family and friends so that they can cope with the situation.

However, people need to consider other measures as well. For example, they can contact their energy supplier so that they can inform themselves about other tariffs and see if they are using the best one for their needs. Another idea is to insulate their homes and in that way they will use less energy. Those are just two simple alternatives to turning down your heating or using less electricity.

Furthermore, according to Citizens Advice, many people have looked for online advice about their energy bills or fuel debt problems. The rising cost of living will push a lot of people to cut back on essential necessities such as travel, energy, housing and food.

The UK Energy Secretary has stated that the recent recession has been the deepest in the peacetime history of the UK and as a result, many people have less money.  Furthermore, the government claims that it is its top priority to help those people who have problems with paying their energy bills. It works on reforms for the energy market by offering more supplier and thus, better deals for consumers. Also, it launches many new projects aimed at both individual households and communities groups in order to help them control their energy usage. It is important to educate people on how they can make their homes more energy efficient and thus save more money.

How to Stretch Your Budget

At some point in their lives, everyone needs to live on a budget and be careful about their spending. Here are a few ideas of how to make the most of your budget.

1.      Pack lunch from home and when you do your grocery shopping, buy snacks in big packages so that they will last longer than the single-packed snacks that are sold in smaller chains. By buying a lot of things at once, you also save on money for fuel!

2.      Try cheaper, healthier alternative snack items at stores like Trader Joe’s.

3.      Instead of buying coffee on the go from some of the big coffee chains, simply make a coffee at home the way you like it and bring it in a thermos. This will save you at least £5.

4.      You can save money from gas or transport by taking walks or riding a bicycle whenever possible. This is both a good exercise for you and for your walletimages.

5.      When go go shopping for clothes or shoes, first check the sales area or look for bargain clothes shopping destinations on the internet on some online guides.

6.      If you feel more adventurous, explore some thrift shops. You can find great deals there, for example £1 Sundays. You just have to have little patience to look through the unorganized piles and do little research beforehand.

7.      Make a strategy beforehand on your shopping. For example, a lot of holiday items go on sale immediately after the season has finished and this is the time when you need to hit the stores and store some items for next year.

8.      If you need some house items, it is always a good idea to check out some low-priced stores such as IKEA, Wilkinson, etc.

9.      Check out on the internet for free giveaway items that are free of any charges and fees and only have to be picked up, like furniture for example.

10.  If you haven’t been to a yard sale- give it a go. You never know where you may find something nice.

11.  Before making big purchases on electronics for example, do a research so that you know what are the best deals on the market and do not fall for the first thing you see. Sometimes big branches are not always the best deal for you.


Best Ways to Raise Cash at Little Cost

0% balance transfer and purchase card

Although this does not initially sound like the best way to borrow due to the fact that a balance transfer card will aid you in freezing debt rather than borrow further. However, some card on the market offer customers a 0% balance transfer as well the benefit of 0% on new purchases. The current best deal is being offered by Halifax by way of their All in One Online MasterCard. The card offers 15 months of interest free balance transfers and the same period of interest free new purchases.

Unsecured personal credit

Obtaining a personal loan has never been cheaper. With such a loan it’s easy to keep on top of payments as you are aware of the monthly brake down and a loan which you can take out of up to £15,000. Clydesdale Bank are currently offering the best deal on the market charging 5.1% on loan ranging from £7,500 and £15,000 over 12 to 72 months. The cost of borrowing £7,500 with the bank over a three year period would break down to monthly payments of £224.73 with the total amount which you will pay back being £8,090.28 (an interest of just under £600). An alternative loan may be obtained from Sainsbury’s who have now matched the 5.1% rate offered by Clydesdale.borrowing

Interest-free overdraft

Overdrafts are a quick, cheap and easy way to raise finance in the short term. Currently Halifax are offering £100 overdraft on their current account with 12-month interest free overdraft. Depending on your credit score and financial circumstances Halifax are willing to give its customers up to £5000 in overdraft. First Direct are offering customers £250 interest-free overdraft as well as £125 for switching. For those borrowers out there needing a quick short term loan a good way to go is for the 123 Santander Account which offers an interest free overdraft for up to four months. A word of warning, make sure to prior arrange your overdraft sum with your bank since hefty charges are often imposed.

The Government

If you are troubled with financial difficulty and have a poor credit score, then perhaps opting for a Government loan may just be the route for you. The coalition has a range of interest-free loans which are often helpful to those most in need. The Budgeting loan provides financial support for the purchase of essential goods such as clothes, the repayment of certain debts as well as for covering rent. The period in which the loan has to be repaid is 104 weeks which in essence is two years. However, the loan is for those most in need so to qualify you must have been receiving income related benefits for at least 26 weeks prior to taking out the loan.