When financial markets are volatile – especially when your own finances are under pressure – the chance of getting a cheap loan can seem daunting.
This is an important decision, and it is worth spending your time to make sure that you do not get caught up in the downward spiral of paying interest or getting stuck in a long-term repayment agreement for many years.
Whether you are looking for a loan, or you already have one, and want the best deal, there are options. Read Money Magpie’s tips on how to get your funds right and find cheap credit.
Specific Loans for a Smaller Amount
Higher rates in the market mean smaller borrowings. This is because it is possible to borrow a small amount of money in the short term, so the lender will not have much time to make money on interest payments. So, instead, they raise interest rates to make sure they are profitable.
Because of this, for a small amount of money that you think you can repay in a relatively short period of time, you should definitely look for ways to get a non-performing loan.
Purchase Credit Card 0% APR allows you to pay for transactions using your credit card for a specified period of time – usually six to 12 months – depending on which card you receive.
The longest running 0% of the currently available purchase agreement is the APR Tesco Club card Credit Card, which offers you 22 months prior to charging interest. You collect one club card point for every 4 you spend on the card from anywhere in the world.
(Especially if you shop at Sainsbury’s) is Sainsbury’s Credit Card, which offers its shoppers a card that offers 0% on balance transactions for the first 29 months and 0% on purchases for the first six months or 0% for 27 months. On purchase. Like the Tesco card, you will collect loyalty points when shopping on your Nectar card – in fact, you must be a Nectar card holder and actively use it within six months to apply for a credit card.
The same principle applies to all of these cards; you use the card to pay what you need and then you have a period of 0% interest to pay the remaining amount. You will be charged interest after this time – so pay it off quickly!
How much can you spend?
The amount you can spend on the card depends on your credit limit, which is defined by your credit rating. Credit limits vary greatly (up to £ 250 in regions 250). Remember, however, that no matter how much you spend, it can be very difficult to repay in full at 0% interest, so make sure you have the funds to repay it.
Not everyone approves of these cards. Keep in mind that every time you apply for a loan and it is rejected it reflects negatively on your credit rating.
If you find that your score is not the best, it is best not to apply for one of these cards. Try to read as more as possible about improving and viewing your credit score.
Replace the card with less regular balance. Look here for the lowest fixed rates.
Need more time to pay off the balance?
What can you do if you are unable to repay what you owe within a year, then take a 0% APR on the balance transfer credit card. These cards do not charge interest on balances transferred from other cards – that is, the card you first paid for the transaction.
Without applying for the Platinum card, the longest 0% balance transfer contract is the Knot West balance transfer card, which offers 0% for transfers up to 20 months.
This greatly increases the time it takes to repay your loan, but it is not a silly method. When things change all the time, when you get your 0% APR result during the purchase period you should definitely make sure you have a suitable card to change your presence. That being said, it is unlikely that they will suddenly disappear completely; instead, the interest period will be slightly reduced.
Loans for the Bigger Amount
The advantage of a personal loan is that you can ensure that you buy at a monthly repayment rate, that you are sure you can buy, and for a limited period of time.
However, personal loans can be confusing. Not only do you have to look at the interest rate you have to pay on the loan amount, you also have to repay it.
A lot of people don’t realize that debt is really like borrowing money from a bank. You get all the money you ask for, and then every month you repay it a little, and a little more for rent. The longer you borrow money, the more ‘rent’ you pay. See below for an explanation.
If you borrow 500 7,500 over three years at 8% APR, you will repay a total of 4 234.14 per month up to 4 8,429.04 – which is 9 929.04 for total interest.
If you take out the same loan over five years instead (actually 7.9% APR is charged), your monthly repayment is just that. 150.81, but in total you will repay 9,049 – a total of 5 1,549 interest – plus a cost of over 600.
Ideally, you should borrow at the lowest rate you can find in the short term.
How to Find Better Loan Deal and Swap?
If you have already entered into a long-term loan agreement, you can save money by taking out another loan, repaying your original loan, and then repaying it to a second lender – such as restructuring.
The only drawback is the prepayment fees or penalties.
The problem with loans is that the cheaper ones are rarely more flexible. Banks want to lock you in for a period of time, ensuring that they earn an income by giving you money. Just as consumers are guaranteed to know how much they have to repay each month, banks also want to know how much interest they are going to pay.
So if you decide to repay the loan in advance, they will charge you to recover some of the lost interest.
Calculates the cost
If switching is worth it you need to understand how much money the new loan you are considering switching to work will save. You do this:
Calculates the term of the loan you currently hold and how much interest you will have to pay in total for the new loan.
Make a difference between this amount and the amount you owe for your current loan, plus the penalty for repaying the interest paid on the new loan.
If you can offset the early repayment penalty with the difference between the two loans and save some more, it is time to switch. Otherwise, it would be better to stay where you are.
You can save money by getting a lower interest rate when changing or by reducing the repayment period.
Reducing the term of your loan
Let’s take the previous example for a 500 7,500 loan.
The difference in cost between the three-year and five-year periods is 69,619.96. The initial settlement fee is interest for up to two months, which comes to about £ 300 for a period of five years.
Therefore, if you switch from a five-year loan to a three-year loan, you save over £ 300 even with the initial repayment fees (ஆக 619.96 – £ 300 = £ 319.96).
So your time to switch to this matter will be clear.
Find the lowest interest rate
By finding loans with low interest rates and shortening the term of the loan, you can try and get the best rate. This is a bit tricky as it gets a somewhat lower rate and will not always save you money considering the initial repayment fees.
For example, if you are currently repaying a £ 10,000 loan from Halifax at 8.9% APR over five years, and you saw the same loan advertised at 7.9% APR from Tesco Personal Fund, you might consider switching.
The initial settlement fee for a Halifax loan is equal to 58 days interest, which means you will actually pay more by switching because the difference in APR rates is not more than the initial payment.
The first thing to do before applying for any loan is to look at your credit rating and remember to cancel it at the end of the 30 day free period if you do not want to subscribe.
By checking your credit rating, you know which loans you can access because they only apply to those with some very high ratings. This will give you a realistic idea of what you are looking at and will help you see how much you can save.
Some Alternatives to Banks
Credit unions are independent co-operative societies formed and owned by members. They provide loans and credit at a competitive rate, and they generally aim to improve the community.
There are no down payment fees, and you need to pay off your debt and save often. This includes life insurance. If you die before repaying the loan, the insurance will cover the outstanding fees.
The amount of interest can increase or decrease. It varies from one union to the other union. By law, they are not allowed to charge more than 2% per month in arrears of debt reduction, which equates to 28% APR. It is worth weighing this against the loans you get from banks.
You can check the credit calculator provided by the Limited Association of British Credit Unions.
Click here to find your local credit union.
Bear-to-peer loan with sofa
Sofa is an online marketplace where people register their money as a loan – and are guaranteed a huge return on it – this money is distributed at low cost to all the users who actually sign up for a personal loan. This agreement works very well for both parties because taking a bank out of the equation means that the borrower does not have to pay expensive overheads.
The site offers loans for one to five years, earns its money by charging borrowers a transaction fee, and offers an annual service fee of 1%.