How do I choose the Best Loan for me?

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If you are looking to borrow money then you may find yourself getting rather confused with all of the different loans available and different lenders. It is important though that you pick the right one because you will then get the best value for money. But how do you pick?

Financial advisor

If you are prepared to pay then you could ask an independent financial advisor to help you. They will be able to explain to you the difference between different loans and which will suit you and your purpose best. You can find out this information yourself though, but it will take a bit longer but you will save money by doing so. It is up to you whether you would be happy paying for the advice. You may find that if the loan is a large one that you will save so much money from using the advice you get that it is well worth it but a smaller loan may not offer so much in terms of money savings compared with other similar loans so you may not make enough to cover the fees.

Right loan for right purpose

It is important to pick the loan which will best serve what you want. This can be tricky but once you understand a bit more about loans this can help. Firstly, you need to identify if there is a specific purpose you are borrowing money as there are some loans set up for this. These are mortgages for buying a home, student and postgraduate loans to help cover the cost of course fees, car loans for buying a vehicle and things like this. The name of the loan gives away the purpose. However, there are also many loans which are for general use such as personal loans, payday loans, credit cards and overdrafts.

You need to also think about how much money you want to borrow. Some loans, such as personal loans will allow you to borrow thousands of pounds but an overdraft may only allow you a few hundred, depending on the limit that your bank have set. Therefore once you have identified how much you need to borrow; you will be able to decide which loan types would be most suitable.

Knowing how much you will have to repay and how often can be really important in helping you to decide. You need to make sure that the amount is affordable for you. You need to consider how much money you usually have available each month after your essential spending has gone out and whether this will be enough to be able to afford the repayments.

It is also important to calculate the cost of the loan and see how much that is. You could be shocked as to how expensive some loans can be in total as it is not something that we often calculate.  work out whether you think it will give you good value for money.

Best value for money

This can seem a bit odd to work out for a financial product but it is just as important as for anything else that you buy. Assuming you have decided on which loan type you want to go with, as it suits your needs the best, you then need to compare the lenders to see which is the best value for money for you.

You will need to compare the cost of them, but this is not necessarily the only factor that will be important. You also need to think about what you are getting or your money. Ask yourself questions such as what sort of service are you getting, what is the reputation of the lender like, what will they be like if you miss a payment? This is a lot of information but you should be able to find it out by looking at online reviews as well as by looking at the terms and conditions of the loan or speaking to the customer service department.

It is important to get this decision right. It will help to determine whether you will be able to afford the loan and whether you feel happy with that specific lender. This could have a big impact not only on the cost but if you have any questions or get into trouble with repayments as you will want to go with a company that will be able to help you.

Finding out how much the loan will cost and whether you will be able to afford the repayments is important. Obviously, you do not want to take on something that you cannot afford or that turns out to be outrageously expense. However, you also need to wary of anything that is too cheap as it may not offer you everything that you need. This is why it is important to study this carefully before you sign up to a loan.

Is an Interest Free Credit Card Worth Getting?

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An interest free credit card can sound like a fantastic idea and it obviously has advantages. With no interest to pay it means that you can effectively borrow money for free. This sounds too good to be true and it probably is in many cases. This is because the interest free period will not last forever and quite often, once the interest starts being charged it is really expensive. This means that the card will only be worth getting in certain circumstances.

Repay in full before interest starts being charged

The first thing to be very aware of is when the first interest payment is charged. This will vary depending on the card that you take out. Usually you will have an interest period of a few months but this might be a s much as a year. Make sure that you note this and if you are unsure then contact the customer services department and note what this date is as it is very important. You want to make sure that you repay the card in full before this date comes about. This is because the interest that you will be charged is likely to be very high. These types of cards tend to have higher interest rates than standard ones. This means that if you do not think that you will be able to afford to make the repayment, then it could be best to just get a cheaper, standard card or to use a different type of borrowing that will save you even more money.

Only use it for normal spending

It is really important not to see the card as a free pot of money that you can use to spend on anything that you want. There may be things that you have been wanting to buy for ages and hoping that you will be able to get at some point. This is not the sort of thing you should be using the card for. You need to keep in mind that you will need to repay it in full. Therefore, you need to only buy things that you would normally buy, such as food, fuel and things like that, then you know that you will have enough money to repay it.

Put the money you would have spent in a savings account

As you buy things with the card take the money form your bank account and put it into a savings account. This will achieve two things. It will ensure that you have enough money put by to pay for the card when you need to repay it all. It will also earn some interest in the savings account. Therefore, when you repay the card, you will have a bit of money left over which will be the interest that you have made on it.

This will not be a fortune, as the interest free period is unlikely to be that long and interest rates are low at the moment. However, it is better than nothing and means that you will benefit financially from having this card.

Some people would move the outstanding card balance to another interest free card and continue with the process so that they can gain even more interest. This can be a good idea, but you may find that the card company charge for transferring in a balance like this. Therefore, you will need to check this carefully. An alternative thing to do is to take out a second card, once you have repaid the first and repeat the process so that you can get even more interest into the savings account. However, taking out multiple credit cards can look bad on your credit record so do be aware of that.

Be cautious

You do need to be really careful that you stick to your plan with regards to the card. There is always the temptation to use the card to buy things that you would not normally be able to afford. There is also the temptation to use the money that you have carefully put into the savings account to buy other things. If you do either of these things then you run the risk of not being able to repay the card in full or maybe not even being able to afford to pay back any of it. Then you will be subject to those expensive interest rates.

So, the card is worth getting if you are confident that you will be able to use it wisely. You need to be able to be capable of repaying it in full before the interest kicks in. Therefore, you need to put money aside so that you can afford to do this. You will know whether you are the sort of person that will be able to do this with ease or whether it is too risky for you to take on this sort of card.