A British Man's Take on Debt, Saving & Investing

What are debt consolidation loans?

Posted on July 13, 2015 by Lee


Juggling multiple debts can be tiring and stressful. Credit cards, household bills and overdraft and loan repayments all mount up, and it can be hard to keep on top of it all. If you are struggling to pay back a number of different forms of credit, it is relatively simple to consolidate debts with a debt consolidation loan. Although taking out yet another loan can seem counter-intuitive, if you use it sensibly, it will help you to get on top of your debt problem and to feel in control of your life and spending once again.

 

What Is a Debt Consolidation Loan?

A consolidation loan is a large loan that is used solely to pay back a number of smaller loans. As a result, you only have to pay back one large debt on a monthly basis rather than several smaller ones. The advantage of this is that it is much simpler to cope with and, significantly, it can often save you money. Credit cards, store cards and unauthorized overdrafts usually come with relatively high rates of interest. In contrast, lower interest rates are often available on larger loans and at fixed rates. By borrowing a larger amount at a lower interest rate to pay off all your smaller debts, you consolidate those smaller, more costly debts into one larger and, more often than not, cheaper debt – this is a debt consolidation loan.

 

What Are the Advantages?

If you are overwhelmed by debt and finding it difficult to remember who to pay back and when, the most obvious advantage of a consolidation loan is that life becomes much simpler. You are effectively putting all your debts in one basket, which means that you only have to make one regular fixed payment each month rather than several different payments, often at variable rates of interests.

 

Budgeting becomes much easier because you know exactly how much you have to pay back each month and, therefore, exactly how much money you have left over to spend on other essentials. Perhaps the biggest advantage of all is that you may find that you are paying back less than you were before you took out the consolidation loan. Your single payment may be less than the sum total of all your previous smaller debts because you are paying a lower interest rate. A final advantage is that a consolidation loan can help you to improve your credit rating. If you have fallen behind with loan repayments, your credit rating will have suffered. A consolidation loan can help you to prove to creditors and potential lenders that you are a reliable and trustworthy borrower. The way to do this is to make sure you make each monthly payment on time and do not take out any other forms of credit until you have paid the loan back in full.

 

What Are the Disadvantages?

Always look very carefully at the terms of the consolidation loan you are considering. How long are you borrowing the money for? What is the rate of interest? Although you may find that you are paying a lower interest rate than previously, this is not always the case. If the interest rate is higher than for many of your smaller loans, a consolidation loan will be a more expensive option for you. Consider too the number of years it will take you to pay back the loan. It could be that you will end up paying back much more with one consolidation loan than with a number of smaller debts if you agree to borrow the money over a longer period of time.

 

Never be tempted to borrow more money than you need. The idea is to wipe out your debts as quickly and cheaply as you can, not to accumulate fresh ones.

 

Should It Be Secured or Unsecured?

Debt consolidation loans can be secured against your home, but this is not a good idea if you think you might struggle to meet the payments. Secured loans usually offer lower rates of interest but should only be taken on if you are absolutely sure you will be able to pay back the loan. If you cannot, you may lose your home.

 

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What can affect your credit score?

Posted on April 12, 2015 by Lee

When you apply for credit, lenders will take time to find out about you and your spending habits before approving or turning down your application. They do this in a number of ways, including looking at your credit rating. It is a good idea to have an awareness of the different things that can have an effect on your credit rating before making an application. This guide outlines how credit reporting works and the most important things to think about.

 

Credit Scores

Lenders will look at a number of different things to assign you with a credit score. Factors include:

  • Age
  • Salary
  • Credit history
  • The number of children you have
  • Previous mobile phone contracts

 

Understanding your credit score is the first step to improving it. Following the tips below may help you to achieve a healthier credit score.

 

Registering to Vote

Becoming registered to vote provides lenders with a reliable proof of your address. This information is shared automatically with credit reference agencies and can have a big impact on your overall credit rating.


Limit Credit Applications

Applying for credit can have a negative effect on your credit rating, especially if you are unsuccessful. This is because it indicates to lenders that you may be struggling to get credit elsewhere. Always check the criteria before any application to ensure you are eligible to minimise the chances of being turned down.

If you have other credit accounts, it is a good idea to close these. Lenders are unlikely to offer credit when you already have access to large amounts, as they need to know you are capable of repaying all debts owed.

 

Never Miss a Payment

Even payments which are late can remain on your credit record for a minimum of three years. Creditors often consider forgotten payments as a sign of an unreliable customer, and they may be reluctant to risk lending to you. If you are struggling to maintain repayments, always speak to your lenders. Sometimes debts can feel overwhelming, and it may be necessary to consolidate debts or use a balance transfer to take advantage of an interest-free period.

 

Avoid Moving Around Too Often

Lenders are less trusting of those who frequently move house. As part of your credit application, you will be asked to supply details of addresses you have lived at in the last three to five years, and any previous homes will also be linked to your credit report.

 

Check Your Report

Occasionally, credit reports may contain errors or inconsistencies which are potentially damaging to your credit score. For this reason, it is a good idea to check it regularly.

 

Close Joint Accounts

If you hold a joint account with someone who has a bad credit score, it can drag your score down too. Lenders typically assume that a partner with a poor credit rating has the potential to impact your income and ability to repay credit too. Once done, you can send the Credit Reference Agencies a ‘Notice of Disassociation‘ to ensure the link is removed promptly.

 

Keep Your Income as Regular as Possible

If you do not have fixed contracted hours, it can be hard to prove to lenders that you can afford repayments, even if your average income is well above the minimum criteria.

 

Phone Contracts

Check your credit report before applying for a new mobile phone contract. Phone companies will want assurance that you will be reliable about paying monthly bills. The same may also be the case for home fuel accounts, so think carefully before switching your gas and/or electricity accounts to ensure you will not be asked to use a pay-as-you-go meter, which can prove much more expensive.

Before making any applications, whether it be for a mortgage, a mobile phone, a new bank account or credit card, it is important to be aware of what’s in your credit report. A rejected application can potentially damage your credit score. Keeping a close eye on your credit report will also allow you to see quickly if you have become the victim of identity fraud.

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How to Heat Your Home More Effectively This Winter

Posted on October 22, 2014 by Lee

As the temperatures begin their predictable autumnal fall, most families across the UK have already, or will very soon be considering, turning that thermostat once more.  If you are like a third of Brits, perhaps you’re still arguing about it. When you do finally reach consensus however – then another argument begins – where to set the thermostat? Until recently the official advice has been to set your thermostat to 21C and leave it well alone. If it’s already warm enough the heating stays off, and if it’s colder it will spring to life and return your dwelling to a more appropriate temperature.

Things are changing.

According to The Daily Mail, one in 20 thermostats are set at 23C. Now even discounting for the highly prized and much exalted nature of The Daily Mail, there is probably a wisp of truth in that. If we take a leaf out of our parents books and “put a jumper on” instead of cranking up the thermostat to a few degrees from nuclear there are savings to be had.

But just how much?

For an ‘average’ sized home that is ‘averagely’ insulated, ‘averagely’ occupied, with an ‘averagely’ efficient boiler, and all round generally quite average each degree your thermostat is lowered is calculated to save £75 a year. On average, you understand. That could swing in both directions but if like me you like fresh air even if it’s practically baltic outside you stand to save even more than that.

If we take on board the latest advice from a recent study we can see that actually we’re all just as comfortable at 18C (with that jumper on) as we are at 21C in a t-shirt and flip-flops. That 5C shaving from your thermostat – as well as reducing your carbon footprint by 3/10ths of China for the eco-warriors amongst us – it will also on average axe £375 a year off your heating bill.

That’s worth repeating – so I will. Set your thermostat to 18C and throw on a jumper – and save £375 a year.

 

Insulate

One of the biggest things you can do to cut your energy bills and heat your home more effectively is to review your insulation. Cavity walls, lofts, double-glazing, and so on. Without a pleasantly insulated place in which to put your home heat it’s a tragic waste to then see it come out of your radiators, whistle past your ears, up into the loft and straight out to melt the snow on your roof, rather than staying in the room and keeping you warm.

 

Don’t heat the street

Radflek recently got in touch about their line of radiator reflectors. As part of their #WinterWarmup campaign they sent me one of their products to test out. The premise is quite simple and looks appealingly easy, even for the most frigid of DIY avoiders and the numbers they quote and thermal images they present are quite scary. Up to 45% of the heat energy radiated by your radiators goes into heating up the wall and the street rather than you and the room you’re in. By simply reflecting this potential wasted heat back out in to the room, you will reach the desired temperature both more quickly, and more cheaply, as your boiler won’t have to fire for nearly as long.

I will be reviewing Radflek more fully in a future post so stay tuned. They reckon you’ll earn back the cost of buying their product in a year and with a very long predicted life span for Radflek you’ll soon be quids in.

 

Don’t “put the thermostat up”

The Telegraph recently conducted some research and it reckons 35% of Brits turn up the thermostat to heat the room more quickly. It doesn’t. It just wastes energy and probably makes you too hot. Your heating system isn’t like your car in that the harder you push the accelerator the faster you go. Your heating system will plod away at the same speed bringing up your home temperature whether you set it at 18C or 188C. It just takes longer and uses more energy to get there.

 

Learn your programmer

There are some excellent ‘smart’ products coming onto the market and growing in popularity (Hive and Nest being just two of them) that make programming your system a breeze and they even learn your schedule by noticing when you’re home or away and adjusting accordingly. For the slightly less techno-geek amongst us it can really pay to learn how to use your heating programmer effectively. Take the time and tell it your schedule if you work 9-5 Monday to Friday. Why pay money to heat your home when no one is home? Just tell it to come on an hour before you get home.

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