You will find that banks will vary in how much they charge for different things. This means that if you want a competitive overdraft rate, then you might find that you will need to switch to a different bank. However, you may wonder whether it is worth it.
The overdraft rates can vary quite a bit between banks. Usually they vary between 35% and 40% but there are some that will be outside of this. You may find that if you pay a fee for a current account then you will get a better rate but then you will have to work out whether it is worth it, considering that you have to pay a fee. You may get other benefits of paying that fee so you will need to calculate whether it will provide you with good value for money.
Is a Hassle
Switching banks can be tricky. Although the banks are supposed to make it easy for you to switch to a new bank and help with moving your standing orders and direct debits across it can still take a bit of time to get it all sorted out. You may find some do not switch properly and you may find that you will also need to swap over payments going in to the account such as your salary, pension etc. You may also need to get used to visiting a different branch, if you deal with a branch or banking online or calling a different bank etc. However, if you can save a significant amount of money, then it could be worth it, but the amount that you save, could very much depend on how much you are already paying as well as how often you use the overdraft facility. If you rarely use it, then it may not be worth the hassle, but if you use it a lot, then it could be.
Rate Could Change
There is always a risk that the overdraft rate could change. So, you could find that you will move banks to get a better rate and then you will find that the rate changes and you will be able to get a better one elsewhere. It can be very frustrating, but when you sign up to a variable rate, then that is the risk that you take.
It is also good to consider the customer service that you get from the bank. You might value this a lot and therefore, it could be a risk changing to another one and therefore you could find that you are reluctant to change. Having good customer service can be worth a lot as it is nice to know that any queries that you have or any problems that you also have will be resolved easily.
It is not an easy decision to make. However, if you use the overdraft a lot, then the cost difference could be a lot more significant and therefore make a bigger difference to you and therefore make it more worthwhile switching. However, it is worth thinking about the customer service and the bank itself and whether you feel that you get good value for money compared to what you think you might get form others. This is because it can be a hassle to switch and you may find that the rates change anyway and the place you go to may put theirs up and the one you move from might put theirs down so it might end up not being worth moving after all. It will always be a risky thing, but you need to sometimes take a risk if you want to save money so you should give this some serious thought.
An interest only mortgage is a mortgage where you will only need to pay the interest each month. This means that you will be charged interest and then have to pay that and you will not need to make any repayment of the amount of money that you have borrowed until you get to the end of the mortgage term. This is likely to be between twenty and thirty years.
Advantages of an Interest Only Mortgage
Doing this means that you will be able to use the rest of your money how you please and you will not be forced to pay off the mortgage with it. Most people will choose to invest some money each month and then their money will hopefully increase in value and then by the time they need to repay the mortgage they will have enough to pay for it and they may even have a bit extra left over as well. If what they have chosen to invest in does well, then they will have some extra money to play with or they will be able to start paying in less as they move towards the end of the mortgage.
Only having to pay the interest means that if you are struggling money wise, they you can reduce what you are investing and simply only pay the interest. Then you will be able to continue to keep your home and hopefully make up for the lack of paying in money at a later date. This flexibility can be really appealing.
Disadvantages of an Interest Only Mortgage
If you end up investing in something that does not do well, then you may need to find money from somewhere else in order to pay off the mortgage at the end of the term. This has happened in the 1980’s when a lot of people used endowment funds to invest in and the stock market did not do a s well as predicted and they had to start paying in more money in last years of their mortgage to make sure there was enough to repay it, when they had initially hoped that they would be able to have some extra money at the end form the endowment that they could have once the house was paid off. This means that it is really important to make sure that there is enough money being paid in and that you monitor the money so that you know how much is there and work out regularly whether there will be enough. If you have a financial advisor, they might be able to help you with this but you should also be able to work out targets for how much money you should have accumulated each year so that you can check if it is enough.
It can be very tempting to think that because the house will increase in value, that you will not need to worry about paying off the mortgage. You could think that you will be able to sell the house when the mortgage is nearly running out and then use the proceeds from the sale to pay off the mortgage and then use the money that is left over, to put down on a new home and get another mortgage. While this sounds good in theory there are a few flaws. Firstly, the house may not gain in value and so it may not sell for enough to repay the mortgage. You may find that the money left is not enough for a deposit. You may not be able to get another mortgage because you only repaid the interest on the last one and did not invest (this could be revealed if they investigate your finances) or you might be close to retirement age and lenders may not want to lend you money beyond you working years. You will eventually have to pay for a home if you want to won one. You will not be able to keep selling and getting a new mortgage.
There are all sorts of different options available for us to borrow money. Some people will have more available to them than others, but many of us will have an overdraft. An overdraft is often offered as part of a current account and is therefore there for us to use when we need to. However, just because something is available, it does not mean that it is necessarily something that we should always be using. It is a good idea to think about whether the overdraft is a good way for you to borrow.
How an Overdraft Works
So if you draw out money form your current account, either by direct debit standing order, cheque, cash or debit card, you will have a limit as to how much you will be able to take out. This limit is not the amount of money that is in the account but it is the amount plus the overdraft. Therefore, the overdraft will give you access to some extra money that you do not have. You will just be able to help yourself to this money and use it as you see fit. There will be a limit as to how much you can have and different banks will have different limits set. This limit will be an individual thing and even if you are with the same bank as other people that you know, you could find that your overdraft will be a different amount to them. This is partly because you will have a different credit rating but also might be based on your income, how much activity goes on in your account and other conditions that the bank uses to decide these things. Once you have borrowed some money, you will start being charged interest. This tends to be between 35% and 40% but this will vary with lender and the type of current account that you have. You will not be under any pressure to repay the overdraft, but as soon as money s paid into your account, perhaps form a salary going in, the overdraft will be repaid or partially repaid with this money.
What it is Best for
Overdrafts tend to be for relatively small amounts, perhaps hundreds or maybe thousands of pounds. This means that they cannot be used to pay for extremely expensive items. They are also designed to be short term, as they get repaid quickly. They tend to be expensive compared to some types of loans and so that is something that you need to be careful of. Make sure that you compare the costs so that you know whether you are paying more than you could be. They are very quick though and can therefore be very useful when you need money in an emergency. So, if you run out of money and you need to pay a bill or buy food or something like this, then it can be reassuring to know that the money is there. As you are more likely to run out of money towards the end of the month as well, then it can be handy to know the overdraft is there and you will repay it more quickly as it will be closer to your pay day. It can be tricky at times though, if you have not budgeted properly you may accidently go overdrawn. It is therefore wise to make sure that you always keep a close check on how much money you have in your current account and then you will be able to make sure that you do not accidently go overdrawn. You do not want to do this as it will be expensive and it will be better to plan your spending carefully and make sure that you do not overspend by mistake and have to pay this extra money without planning to.
If you need money in an emergency then you may wonder what your options are. There may actually be more than you think and it could be a good idea to think about the pros and cons of each so that you will be able to decide which will be the best to suit you and the situation that you are in.
If you have any savings, then it can be a good idea to use those. His is because you will find that this will be the cheapest option for you. Even though you could find that you will miss out on a bit of interest, it is most likely that it will be much dearer to borrow money compared with using savings. It is not easy to do this as many people will not want to part with their savings and will think that they want to keep hold of them. Maybe they worry that there will be a worse emergency or that they are saving for something specific and they do not want to spend that money. However, it is worth bearing in mind that you could pay into those savings and replenish them and it will be a lot cheaper than taking out a loan. You could even use the money that you would have used to pay the loan, to pay into the savings.
An overdraft can be a really quick way to borrow money if you already have one arranged. It will be there for you to use with your current account so you can draw out money or transfer money which you do not have. If you do not have one arranged or have maxed it out then this will not be an option and you will also find that it could be expensive. There is no pressure to repay quickly and therefore it could mean that you will have the loan for a long time which will mean that the costs will add up. The interest is also quite high at usually 35% – 40% APR which compared to some other ways of borrowing is pretty expensive.
A credit card will allow you to be able to buy things and not pay for them immediately. It could be useful if you need to pay for things and a credit card makes an acceptable form of payment. However, unless you have a credit card already then it may take too long to get one. You may also have already spent as much as you are allowed to on the card. A credit card interest may not be so high as an overdraft but you will not need to pay back more than a small minimum each month. If you just pay the minimum you could take years to repay what you have borrowed and that interest can really add up.
Borrowing From Friends and Family
It can sometimes be worth asking people you know if you can borrow money form them. They are likely to be happy to help you and they might not even charge you interest. Even if they do charge you it could be less than a traditional lender. You may want to be careful though and make sure that you agree with them how and when you will repay so that you cannot fall out over this in the future.
A payday loan can be arranged quickly, although the speed will vary between lenders but could take as little as a few hours. However, you will need to repay it very quickly, and in full. So, on the next time that you are paid you will need to repay it all and so that could be difficult to manage. It is worth thinking about whether you will be able to afford this as if you miss a repayment there will be additional charges to pay.
There are lots of things that we use loans to buy. However, we may wonder whether certain loans are suitable for buying certain things. It is a good idea to have an idea of what certain loans might be useful for and whether what you want to buy will work for that type of loan. So, if you are buying gifts, then think about whether the quick loan will be a good way to pay for them.
What are Quick Loans for?
There are some loans which are designed for specifically buying specific items. So, if you get a mortgage it is only use for paying for a home and any costs associated with that. However, with a quick loan, there is no specific use that they have to be for. This means that the lender will not check what you are spending the money on and so you can potentially use them to pay for anything that you wish.
How Much Can you Borrow?
It is good to be aware that there are limits on how much you can borrow with all loans. With a quick loan, you will only be able to borrow up to £1,000 and this will depend on the lender. There are Different rules set by different lenders too. Some may only lend small amount to first time borrowers until they feel that they are able to trust them enough to lend them more. If you need to borrow a lot of money, you will have to check for this, to see whether you will be able to borrow enough money for the cost of the gifts that you want to buy.
How are They Repaid?
It is important to make sure that you are aware of how the loan is repaid. This is because you will need to repay the money and you need to check that you are capable of repaying it so that you are able to avoid the additional fees that you will be charged if you miss the repayment. This means that you will need to check this out carefully. With a quick loan, it is normally repaid very quickly on the next day that you are paid. So, you will need to check that you will have enough money available to repay it when you are paid.
Will They Work?
It is a good idea to think about the way that this sort of loan works and you will then be able to decide whether you feel that it will give you what you want. Think about how much money you need, how quickly you will be able to repay and whether you will be able to afford that. Also consider the cost of the loan and whether you feel that it will give you good value for money. Quick loans tend to be quite expensive because they are offered to those with a poor credit record to help them out with emergencies. Buying gifts is not really an emergency and so it might be worth considering whether this really is the right type of loan. In fact, it is worth thinking about whether getting a loan is really the answer. If you do not need the items quickly, then it could be better to save up for them and this will mean that you will not be paying extra for them, which is effectively what you would be doing if you used a loan. Obviously, it depends how quickly you need the items and if a loan is your only option then make sure that you compare types of loan so that you can get the best for you.