Is it a good idea to get a Loan to Pay for Christmas?

Christmas is a time of year when people tend to spend a lot more money than normal. There are gifts to buy for many people as well as cards to send, decorations to buy, extra food and drink to buy as well as costs of travelling and entertaining. These costs really add up and many people struggle to afford everything and consider whether it is worth getting a loan to help out.

It is wise to start by deciding on whether you really need to buy everything that you do. There might be ways that you can cut down on what you are buying but still manage to have a great time and not overspend. Saving some money each month or buying a few things each month can be a way to spread the cost without having to borrow money. Cutting the cost of the things that you buy can also be a great way to keep down how much you are spending. All of these ideas will be a lot cheaper than getting a loan as loans always have charges.

The things to consider when considering a loan are the cost and the repayments. It is always wise to calculate how much the loan will cost you to see whether you think that it is worth it. Imagine you were borrowing £250 at a cost of £50. This means that the £250 worth of goods that you buy with the money will actually cost you £300. Consider whether you think that they are worth this money. Think about whether you think that it is worth paying that extra money to get what you want. It is also worth thinking about the repayments. Find out how much you will be expected to repay and how often and consider whether you can afford to do this. Think about where you will find the extra money needed for these repayments and how you will manage the rest of your expenses when you are paying out this extra.

Although buying things for Christmas brings a lot of pleasure, you need to consider whether it is worth it if you need to borrow. You may need to go without things to manage the repayments, the loan could be stressful for you and it could take you a long time to repay. No one receiving a gift, visiting you or having you visit them would like to think that you are suffering to buy them a gift, pay for transport or to entertain them. They would rather that you were happy and have a good year rather than treating them and then struggling for a long time afterwards as a result of it.

If you plan well in advance then you should be able to manage and spend less money. Looking out for items on sale or even in second hand shops can be a good start. There are lots of tips and tricks online about saving money, spending less including great ideas for cheap Christmas gifts and decorations that could be really helpful. It just takes time and planning, which you should be able to find if you really want to spend less and avoid a loan.

Getting a loan leading up to Christmas can be hard as you will need to start making repayments at a time when you are probably still spending extra money. However, you may find it even more difficult in the long run if you get into a situation where your income is reduced or your costs go up for any reason. It is always wise to consider this when getting a loan as well as thinking about how you would cope if the interest rates went up and therefore you would have to pay higher repayments.

So getting a loan at any time takes a lot of thought. You need to consider whether you will be able to manage the repayments and what affect that will have on your lifestyle. Then think about how you will cope if interest rates go up, your expenses go up or your income decreases and you still have to find the money to repay it. It can be wise to see whether there are ways that you can budget and save money, save up or spread your spending over the year so that you do not have to borrow money.


Savings Versus Early Loan Repayments – Which is Best?

If you have some spare money it can sometimes be hard to know what to do with it. You may feel secure putting it in a savings account so that you have it to fall back on, but it could save you money if you use it towards paying off a loan. So how do you decide which is the right thing to do?

Your decision may be influenced by how much money you have to play with. If you have a large sum of money you may be able to pay off the debt and have some left to save as well. It is more likely that you will have to choose between them though. A small sum of money may not be worth saving as it will not make a big difference if you need money in an emergency but paying some off loan will mean that your interest will be reduced and the loan will be cheaper. A larger sum could be split with some saved and some put on the loan, but it depends on how you feel and whether peace of mind of having savings is more important than the savings that you will make in interest on the loan and the fact that you will be closer to paying it off will be an advantage as well.

The difference between interest rates could be a factor as well. If your loan is really expensive then you might be more motivated to get it paid off as quickly as possible rather than save the money in an account with a low interest rate. However, if the savings account interest is pretty high and the loan is cheap then it may not make such a big difference. Some lenders will charge you if you want to pay a loan off early. This might make it too expensive to consider doing this and you may decide that it is not financially viable. Some lenders may only allow you to pay a loan off early in a lump sum rather than a series of overpayments so you may need to save up the money anyway, before paying off the loan.

You may decide you want to keep some savings to stop you having to borrow more money should you get short. Although this seems to make logical sense, it can be better to pay back the loan and see what happens. If you are careful, it is likely that you will not need to borrow any extra money anyway and you will benefit from having paid off some of the loan.

Paying off some of your loan can help your credit record but having savings will not make a difference to it. This means that if you want to improve your credit report, perhaps because you want to borrow money for a mortgage or something like that, then paying off the debt can be the best way to do this. Paying it off early should be a big advantage with this. It will also enable you to pay out less each month as once the loan is paid off you will no longer have to make monthly repayments. This may allow you to save up for things rather than borrow or save up for a deposit if you are buying a home.

So if the cost is the main factor for you, then paying off a loan is usually better than putting the money in a savings account. The exception to this is when the lender charges a high amount to make overpayments or when the loan is cheap and savings pay high interest. It is worth calculating the costs so that you can work out which will be the best. If you find it hard to work out or are not aware of all of the options available then it could be wise to talk to a financial advisor as they will be able to identify the best options with regards to cost.

If there are other factors that matter more than cost or as much, then you need to consider those a swell. Think about the peace of mind of having savings versus the peace of mind of paying back a loan, for example. Consider the difference it could make to your credit rating and how you will be able to afford more things once the loan is paid off.


Is it Worth Paying a Mortgage Back Early?

There are many people these days that are striving to pay their mortgages back early. You may hear of this and wonder whether it is worth you doing the same thing.
The main reason for people paying their mortgages back early is due to the cost. The longer you borrow money for, the more expensive the costs of borrowing are. This means that if you pay it back a year early, you save a year’s interest and if you manage to do it even earlier then you will save even more. However, not all mortgages are the same and some do not offer the same benefits as others.

Repaying a mortgage early is something which is quite a recent phenomenon. This means that not all lenders are geared up for people repaying early and some have high charges to allow them to do this. Most lenders would charge a small administration fee to set up an overpayment accounts so that you can make repayments on the mortgage that are higher than required. Some will charge a significant fee for doing this, called an early redemption fee. It is worth finding out whether your lender charges and how much the charge would be so that you can calculate whether it really is worth overpaying.

While overpaying and saving interest sounds like the best idea, it is worth considering whether there would be ways that you could do better with the money that you are overpaying. If you invested it, for example, you could get a better return compared with the money that you would save on the mortgage interest. Obviously this is a risk as no return on investments is guaranteed and you may in fact lose the money that you have invested rather than gain money. There are different levels of risk with different investments and so it is worth looking into this and see whether you are prepared to take any risk and if so, how much. A financial advisor can be a big help with a decision like this.

You may think that you will be better off putting the money in a savings account. Although they are low risk and you will not lose the money that you have saved, interest on these tends to be very low. This means that you may not make as much interest on the savings than you are paying on the mortgage. This is very rare in fact as banks tend to charge more to people borrowing money than they pay out to savers as the difference is their profit. If base rates are very low and the mortgage rates reflect that and you can find a savings account that pays really good interest, you may be able to beat it but it is very rare. Savings is a difficult issue for some people though as they would rather the security of having some money in a savings account in case they need it, rather than being used to pay off debt. It makes financial sense to use it to pay back the debt, but having savings can offer some peace of mind. This is why having a mortgage where you can overpay but also draw out money can be a big advantage and then you can treat the overpayment account as a savings account. You can have the peace of mind of knowing there is money there to fall back on but you will also be offsetting the mortgage debt and saving interest at the same time.

As well as having financial benefits paying back the mortgage early can help you to feel a lot better too. Knowing that the burden of a debt is gone can bring a sense of relief as well as joy. Knowing that you own your own home and it no longer belongs to the bank can also be such a fantastic feeling and could release you from some restrictions placed on you by the mortgage company. Without a big mortgage debt and repayments to make you could find that it will be easier for you to borrow money for other things, should you want to. The money that was being used to make mortgage payments could also be put into a savings account or paid towards retirement; there are many exciting possibilities.