Month : October 2019

Loan Payday

Secured and unsecured loans over 12 months

Serena Blow
Secured and Unsecured Loans

Secured and unsecured loans over 12 months

Choose the possibility of 12 months less of repayments and hundreds of pounds less interest.

When considering the option of transferring a credit card balance onto another credit card to take advantage of a 0% offer or taking out a loan to consolidate the credit card debt it pays to sit down and do the maths.

Using a variety of online calculators and some simple maths it is possible to determine which option would make the most financial sense.

Secured and Unsecured Loans Over 12 Months
Secured and Unsecured Loans Over 12 Months

Taking the time out to sit down and tackle the calculations could save over £1000 so even if it takes an hour or two it’s still well worth the effort.

People all over the place are advertising the ‘best secured loan’ but what are they really offering?

The best secured loan for one person may not be the best secured loan for another.

Companies are also not allowed to claim they offer the ‘best secured loan’ or any other kind of financial product unless they are regulated and authorised to do so. Check for any reference to the FCA for someone like pales who offer 12 month loans.

Check the advertising on loans

Check the Advertising on Loans
Check the Advertising on Loans

They may be able to advertise THEIR best rate or loan but that does not mean it is THE best loan available.

(NOTE: If a secured loan lender displays their best rate they must also display their ‘typical apr’ – if it is not the same. If they fail to do so, they are not following the rules.)

Also, the best rate does not necessarily mean the best loan.

Some companies advertise low APR loans but when you read the small print the story is very different.

Some Companies Advertise Low APR Loans
Some Companies Advertise Low APR Loans

For example, one secured loan company currently offers a very low rate of 5.9% APR but it only applies if the loan is above £75,000 and not everyone wants a loan that big so it’s clearly not the best secured loan!

For some people, the best secured loan will be the one from a lender that approves them despite having problems with their credit.

It is because the factors that define what is the ‘best’ are so varied that only regulated individuals or organisations are able to make suggestions that reflect the best solution for an individual based on their circumstances.

Price comparison sites like pales.co.uk are a good place to look and get an idea of what is available.

A licensed broker may also have access to a wide panel of lenders and be able to source a suitable solution from a choice of possible lenders.

Secured loans in the UK ended up with a pretty bad reputation after all the financial fuss of ’19 kicked off.

Secured Loans in the UK Ended up with a Pretty Bad Reputation
Secured Loans in the UK Ended up with a Pretty Bad Reputation

There is no doubt the secured loan lending practices of the past were just as bad as some of the crazy mortgage offers around at the time with up to 125% of the value of your home being available to borrow.

Much like the banks, when the easy money stopped flowing and the industry started to collapse the secured loan companies couldn’t get funding and many of them turned to dust.

By 20018 14 lenders had left the market leaving only about 3 still operating.

Despite demand for debt consolidation going up, the money just wasn’t there to lend.

Like mortgage companies in the UK the secured loan providers had to get rid of risk by tightening criteria and restricting ‘loan-to-values’ of secured loans.

By late 2018 it was observed that demand for secured loans was up and consumer confidence had improved.

2019 is well underway and the options for borrowers are continuing to improve with cheap rates available that beat many unsecured loans.

Loan to Values are Lower
Loan to Values are Lower

Loan-to-values are lower than they were but it is now possible to borrow up to 85% of the value of your home (including other secured debts) and by spreading payments over a longer term they can make other short term debts more manageable.

Of course if a debt lasts longer, more interest could be charged over time so a secured loan could cost more in the long run but could still be a more affordable way to get back in control of debt.

For example, credit card debt can last for a very long time if only the minimum amount is repaid.

This really good credit card calculator shows that a £10,000 credit card debt on a rate of 17.9%  paying a minimum amount of 2% will take 64 years to pay back and cost nearly £27,000 in interest!!

A £10,000 secured loan at a rate of 6.7% could be repaid in 5 years for less than £200 per month and the total interest charged would be less than £2000.

Or, £10,000 at 6.7% over 25 years would cost less than £68 per month but the total interest over 25 years shoots up to just over £10,000.

Still far better than just paying the minimum on a credit card!

Still far Better than Just Paying the Minimum on a Credit Card
Still far Better than Just Paying the Minimum on a Credit Card

Not everyone will qualify for the lowest rate but other rates are available depending on individual circumstances.

In short, a secured loan is a much better option that a credit card when it comes to long term borrowing but if you use a company like pales.co.uk for short term borrowing as you can find on the resource highlighted a credit card may be a better alternative.

Credit cards are evil and should only be used for emergencies or the whole balance should be cleared each month.

If a secured loan is used to consolidate credit card debt the best course of action is to pay off the card, cut it up and close the account.

Another alternative to a secured loan is a ‘further advance’ from a mortgage lender which is essentially a ‘top up’ on an existing mortgage and with mortgage rates so low, it could work out even cheaper than a secured loan.

Loan Payday

Are payday loans helpful?

Serena Blow
Are Payday Loans Helpful

Are payday loans helpful?

I run a personal finance website and on this site I have affiliate programs and also direct access enquiry forms.

An affiliate program allows me to display links to other websites and earn commission when someone clicks or applies.

Are Payday Loans Helpful
Are Payday Loans Helpful

Like this: Virgin Credit Card – 0% for 16 months 2.98% fee (typical 16.6% APR)

The direct access enquiry forms send enquiries direct to qualified and waiting advisers.

In the past there were virtually unlimited marketing budgets in the finance sector and there were an abundant supply of affiliate programs for loan products.

Now there are very few.

Payday loans emerged

Payday Loans Emerged
Payday Loans Emerged

An emerging loan market in the UK does however seem to be advertising everywhere and marketing their offerings through affiliate links.

These are Payday loans. Loans designed to give you emergency cash until you are paid.

They are not designed for long term borrowing. The interest rates are very high (see Silly Apr).

The reason the interest rates are high is so the lender can cover their costs and make the charges even for everyone.

They could charge a fixed fee but that wouldn’t be fair on people only borrowing a little bit.

If the rate was low and the loan was paid off in under a month they wouldn’t make any money.

But, if the loan is not repaid in a month or two months or six…. The costs are high.

Payday loans are costly

Payday Loans are Costly
Payday Loans are Costly

I can see a place for this type of lending because there probably are some people who would have no other option.

However, people who have no other option because they are already stretched could find themselves adding to the problem.

Because I am of the mind that a lot of people already in difficulty will be looking at these products I have so far chosen not to advertise them very prominently.

I know an elderly couple who are struggling to clear an emergency loan and a single mother of two who got into some difficulty with one.

I would be interested in peoples opinions?

Are they a necessary evil or are they just going to add to the already mounting public debt?

Is it worth payment protection on a short term loan?

Is it Worth Payment Protection on a Short Term Loan
Is it Worth Payment Protection on a Short Term Loan

It’s been a while since I’ve written anything but this had to be said! A lot more information is being made available regarding loan payment protection and the cost to the borrower and the benefits of shopping around for prices.

I recently looked at the figures and found some staggering results.

One lender quoted for a £10,000 loan over 7 years, repayments of £158 without loan protection or £213 with protection.

>That’s £55 per month just for the protection.

Whereas, loan repayment protection insurance from an independent provider can cost as little as £2.50 per month.

Yes, it’s true.

Brokers will cover repayments of £160 for up to 12 months for only £4.

Brokers will Cover Repayments
Brokers will Cover Repayments

£4 covers the repayments for 12 months and provides Accident, Sickness and Unemployment cover.

If you’re self employed, it’s not worth getting unemployment cover because it will only kick in once the company is in the hands of the receivers and you’ve signed on.

So for a self employed person taking out Accident and Sickness cover to meet the loan repayments for 6 months, the price quoted online today was only £2.50 per month.

£4 per months gives 12 months of repayments and Unemployment cover as well.

Do the maths.

  • 4/55 x 100 = 7.3%

That’s comparable loan repayment protection insurance for less than 10% of the cost quoted by the lender.

  • £4 x 12 = £48 per year

Compared to:

  • £55 x 12 = £660.

What would you do with that extra £612??