Buy to Let Considerations – Ltd Company vs. Individual Name

Many people across the UK choose to invest their hard-earned money in the housing market. Buy to Let comes with multiple advantages. You can guarantee yourself a steady income besides a salary, and even increase your capital by selling the property at a higher price than what you have paid.

Due to changes in the taxation system though, more and more of those who decide to invest in a let to buy property are wondering whether they should buy in an individual name or ltd company name.

In this article, we will discuss the buy to let considerations you should make before investing your money.

Ltd Company vs. Individual Name: Understanding Taxation

Whether you’re planning to buy a property as a limited company or as an individual landlord, you undoubtedly want to make the most out of it by taking home as much revenue as possible.

Up to 2017, landlords could claim tax relief on most expenses associated with their buy to let property, including finance costs such as mortgage instalments. From 2017 on, the new taxation scheme has implemented the reduction of the amount of tax landlords can deduct from finance costs.

From 2020 on, you will only be able to claim a basic rate reduction from your income tax liability on financing costs.

With the financing costs being the main expense landlords have to face, not being able to claim tax relief on all these expenses means you’ll take home a smaller portion of your income.

Landlords and experts have come up with many creative solutions to counteract this change. Some suggested increasing the rent you charge or getting a lower mortgage rate. These, however, are not realistic solutions, at least most of the times.

An easy way to pay less tax on your buy to let income is to purchase the property in a limited company name.

Owning your rental properties in an ltd name is more profitable in terms of tax you have to pay. Limited companies pay corporation tax and not income tax. Therefore relief restrictions do not apply. You can deduct all financing costs from your turnover and only pay tax on your profit.

However, just because an ltd gets to pay fewer taxes it doesn’t mean owning your buy to let through an ltd is more profitable.

Additional Buy to Let Considerations

While buying a property in a limited company name is more tax efficient, there are other costs that determine how much you’re going to take home at the end of the day.

The mortgage will likely be your highest cost, so it makes sense to keep it as low as possible. Mortgage rates are different for personal and limited company borrowers. The former can pay less than 2% in interests, whereas limited companies often pay more than 3.4% on average.

Buy to Let Mortgages

Another thing you should consider is the way you can access your money. As a private landlord, your income is readily available in your bank account, and you can use the amounts whenever needed. Not only you will have access to your money, but you will also be free to spend the amount as you wish. This is not the case for a limited company.

As a limited company shareholder, you can only take money out as dividends. If you’re also the director of your company, you could pay yourself a salary lower than your taxable allowance to access your money regularly while staying tax efficient. However, any profit over the threshold can only be taken out of the company as a dividend.

Depending on the amount of the dividend, you may also have to pay income tax as a shareholder of a limited company. In the 2018/2019 year, the dividend allowance was £2,000, and this figure could decrease in the future. Anything above that is taxed, and that is a further loss you’ll have to face.

If you already own a buy to let property and think of transferring it to an ltd, know that this is not possible. The only way to transfer property ownership is by a sale and repurchase transaction that incurs further costs, including capital gain tax, stamp duty, and other legal and mortgage fees.

Limited companies also have running costs that you wouldn’t incur as a private landlord. While you could run your business from home and cut off office rental, you will most likely have to pay an accountant to prepare and file your company statements and accounts.

Considering all other costs associated with a property, it would only be profitable to own a buy to let through an ltd company if you have at least four properties. With anything less than that, you’ll be able to take home more money by managing your properties as a private investor.

In Conclusion

Deciding to invest in the housing market as a private landlord or as a limited company should not be taken lightly. Which formula is the best for you depends on your personal circumstances. If you only have money to invest in one buy to let property and plan to use all generated income for personal purposes, it is more profitable to buy as a private investor.

If, on the other hand, you don’t want to use the funds to create a personal income but rather plan to reinvest profits through the company, or if you can afford to buy at least four properties, it is undoubtedly much more profitable to buy in a limited company name.

5 Ways to Raise Money for Home Improvements

High house prices, stamp duty costs, and the overall shortage of property supply determine many homeowners to rather improve their homes than moving into a new one. Giving a new lease of life to your interior, remodelling your kitchen, or building an extension can make your home feel like new.

Regardless of what renovations you want to make, finding funds for your project is essential. Here are five of the best ways to raise money for your home improvements.

1. Use Your Cash

The easiest way to fund your home improvements. Investing your savings or matured saving bonds into your home could be a more sensible solution than investing in a holiday or new car. Home improvements can raise the value of your property with over 10%, depending on their nature.

According to financial experts, cash is the cleanest way to fund your project, as you’re not beholden to a lender. However, this doesn’t mean you should use all your savings on upgrading your home.

To avoid draining your accounts, build up a savings pot and set a budget for your project. You could either wait for the works until you’ve saved all the money or use your savings first before taking on lower debt.

Advantages of using your cash:

  • The freedom of carrying on home improvements at your own pace.
  • Instantaneous funding speed. You won’t have to wait for liquidity to be released.
  • No interest, fee, or charges. Using your savings is absolutely free.
  • No loan to pay back.

Disadvantages of using your cash:

  • Funding home renovation projects could deplete all your reserves.
  • You might not have enough money to fund larger projects.

2. Use a Credit Card

If you only need a small amount, applying for a credit card could be a great way to fund your renovation project. Most banks give their clients credit cards you will have to pay off at the end of each month. Some financial institutions also propose 0% interest credit cards which you can repay in a set number of months, usually over 12, without being charged any interest.

Since banks still lend you money, you’ll have to have an impeccable credit history and a good credit score to get one.

Regardless of which type of credit card you can claim, pay attention to pay your debt on time, or you might be subject to high interest fees and late payment charges. Most credit cards also come with an associated annual cost.

Nevertheless, funding your project through a credit card is often cheaper than getting a loan. Furthermore, some cards may even give you rewards, such as money back perks or airline miles.

Advantages of using a credit card:

  • Money quickly available whenever you need it.
  • Possibility to earn lucrative points and rewards.

Disadvantages of using a credit card:

  • You could pay high interest and fees if you don’t pay back on time.
  • You could spend more than you can afford.

3. Get an Unsecured Loan

Unsecured loans are preferred by most homeowners looking for a way to fund their projects. These loans are not connected to a piece of collateral, meaning the lenders won’t be able to touch your assets if you default on the loan.

Most personal loans and home improvement loans are unsecured, but banks or building societies will unlikely grant you one unless you have an excellent credit report and a steady income.

While you won’t put your assets at risk, know that unsecured loans also come with higher interest rates than secured loans. Unsecured loans also have lower borrowing limits than their secured counterpart; you can usually borrow up to £50,000 depending on your circumstances.

Advantages of getting an unsecured loan:

  • You can get cash quite fast, as most unsecured loans have a quick completion.
  • You won’t put your home or assets at risk.
  • Most people can access unsecured loans.

Disadvantages of getting an unsecured loan:

  • High-interest rates.
  • Unsecured loans tend to lack flexibility. Most of the times, you will not be able to renegotiate your instalments nor pay in advance without facing a fine.

4. Get a Secured Loan

It is easy to understand secured loans are connected to collateral, usually your car or home. While they are more flexible and come with lower interest rates, they put your assets at risk. If you can’t repay your debt, the bank may become the legal owner of the collateral.

However, secured loans are easier to access by homeowners who don’t have an immaculate credit history. 

If you need a higher sum to finish your project, a secured loan can give you access to up to £100,000. In most cases, you’ll also be able to renegotiate your instalments or pay off the debt in advance without facing a fine.

Advantages of getting a secured loan

  • Secured loans can give you more money at a lower interest rate.
  • Repayment periods are usually longer.
  • Repaying a secured loan on time can enhance your credit rating.

Disadvantages of getting a secured loan

  • Getting the loan could be lengthy, as lenders may have to evaluate your collaterals.
  • You can lose your possessions if you fail to pay your debt.

5. Remortgaging for Home Improvements 

Remortgaging for home improvements could be a great solution for homeowners who need to borrow a large amount. For instance, if you’re planning a complete renovation of all your living areas or if you want to build an extension to your house.

If you have enough equity in your home, a remortgage could give you plenty of cash to invest in your project.

However, getting a new mortgage can be tricky. Making early repayments towards your current lender may be expensive, depending on how much you have already paid. Lenders may also be reluctant in accepting your application.

If your application gets accepted though, you may secure yourself a better deal and sufficient funds for your home improvements.

Advantages of getting a remortgage:

  • You can use your home’s equity to get more cash.
  • There is a chance to secure a better interest rate.
  • The possibility of consolidating debts into a single monthly payment.

Disadvantages to getting a remortgage:

  • You will stretch your mortgage to a longer timeframe.
  • Remortgaging could be lengthy.
  • You may have to face some fees to get a remortgage.
  • Your home can be repossessed if you don’t pay on time.

In Conclusion

There are several ways to raise money for home improvements, but all come with pros and cons. As long as you analyse your circumstances carefully and avoid getting debt you can’t afford, there is undoubtedly a way to carry out the renovation works you’ve been dreaming about.

Credit Agencies and the Impact of your Credit Score

Terms like credit score, credit report, and credit agencies can trigger nightmares even in the cleanest citizen. It is easy to understand why.

Accessing a loan or even getting a credit card can be extremely difficult unless you have a good credit history.

Nevertheless, most people find it hard to understand the mechanics of credit agencies. In this article, we aim to throw some light on the matter. Find out which are the credit agencies in the UK, what data they use to generate your report, and how the credit score impacts your borrowing potential.

Credit Agencies in the UK

Credit Agencies

Credit report – that scary thing lenders check before accepting your loan application – is compiled by credit reference agencies, commonly referred to as credit agencies or CRAs. There are three of them in the UK, Experian, Equifax, and TrustUnion, formerly known as Callcredit.

These credit agencies gather information about individuals and use it to create credit reports. Most of this information comes from your credit history and is given to the agencies directly by lenders.

Other information included in your credit score comes from public sources, such as electoral registers, but also utility suppliers, landlords, and local councils.

Once the report is generated, credit agencies calculate your credit score and use it to help lenders decide whether they should accept your credit application. 

Due to different calculation systems, however, your credit score can vary from company to company. Also, each company can only calculate your credit score based on the information they hold. For instance, if a lender decides to transmit information on how much credit you have and how you manage it to one CRA, the other two agencies won’t be able to include this information in your credit report.

Regarding the maximum scores you can get, they are:

  • Experian – 999
  • Equifax – 700
  • TrustUnion – 710

Since credit agencies use complex algorithms to generate your credit score, know there is nothing to worry about if your result doesn’t meet the maximum threshold. If the information held by the agencies is accurate, your creditworthiness will not be affected by a lower score.

How to Check Your Credit Report?

Having a full picture of your creditworthiness is always important, but it may be crucial before applying for a credit card, loan, or mortgage. The easiest way to check your credit score and credit report is directly from the agencies generating it.

Experian allows everyone to register and access their credit scores for free. However, you will not have access to your credit report and will have to subscribe to their CreditExpert service if you want to see your full report. Although you’ll get a 30-day free trial, you will still have to provide your card details during registration.

Equifax gives you access to a free credit score and reports upon subscribing to their 30-day trial. You will still have to provide payment details, but you can opt out at any time.  

TrustUnion’s Noodle gives you access to a free credit report. You can also see what factors are affecting your credit report, sign up for alerts, or subscribe to their web watch service by paying annual fees.

If you want to see a statutory copy of your credit reports, know you can ask all three agencies for one for a fixed fee.

How Does Your Credit Score Impact on Your Borrowing Potential?

Credit Rating

Most people believe a bad credit score simply means they won’t be able to access a loan. While this is not always true, your credit score has a huge impact on your borrowing potential.

In the worst-case scenario, banks and building societies may indeed reject your application. A rejection can be caused either by a poor credit report or by the lack of it. In fact, young adults with little to no credit history could find it harder to get a loan than those who have a bad credit score.

A less-than-ideal credit score can also determine lenders to apply higher interest rates. If you’re applying for a credit card, the bank could set a low spending limit, and you may find it difficult to raise it.

Your credit report can also dictate how much money you can borrow. People with a good credit history may have access to higher loans, whereas those with a poor history may only get small amounts.

How to Build and Improve Your Credit Score?

Since the credit score can turn the odds of accessing funds in your favour or play against you, it is important to build and improve it. Here are a few strategies to follow:

  • Pay all your debt on time. Whether it’s your utility bills, rent, or council tax, make each payment before the due date. All three credit agencies gather data from utility suppliers and landlords to generate your report and calculate your score.
  • Try to have mixed debt. It is hard to build or improve your credit score if you only have one type of debt. Mix things up by getting a credit card and paying your debt on time, get a retail account, and if you can, get an instalment loan too.
  • Dispute any inaccuracies. While credit reports are usually accurate, errors can happen. Check your credit score and report regularly and dispute any inaccuracies. Usually, it is enough to contact the credit agencies and provide proof that you paid everything on time to have any errors corrected – and your credit score improved.

Conclusion

When it comes to borrowing money, your credit score can make or break the deal. An easy way to estimate your application success is by checking the score before applying for a credit card, loan, or mortgage.

Since every lender can use a different provider, we recommend checking your credit score with all three credit agencies in the UK. In this way, you can either fix any errors or work on improving your score if needed.

What Is a Self Build Mortgage? All You Need to Know

Building your own home could remain just a dream unless you manage to put your finances in order before starting the project. A self build mortgage specialist is perhaps the only way to get the funds you need, but what is it and how to access one? Find out how this type of mortgage works, which are its risks and what to consider before applying.

What Is a Self Build Mortgage?

Architect Floor Plans

A self-build mortgage is a specialist residential loan taken out on a property you are building yourself. What makes it different than a standard home mortgage is the way the funds are released into your account.

While lenders will give you a single lump of money for a standard mortgage, a self-build mortgage involves the gradual release of sums in instalments as your project develops. This system reduces the lender’s risk, helping them ensure the funds are spent as planned. 

Typically, you will get the first instalment when you buy the land, a second tranche when you lay the foundation, and a further payment when the built is up to eaves level. The last two instalments are paid when the roof is watertight and upon completion, respectively.

Thanks to the gradual release of the funds, the lender not only minimises their risks but also manages your finances, so you won’t run out of money halfway through the project.

Types of Self Build Mortgages

There are two types of self-build mortgages, the arrear type, and the advance type. If you access an arrear type self-build mortgage, the payments are released after each stage has been completed. You are responsible for any upfront costs, such as the purchase of materials and paying the constructors.

Sometimes, this means you will have to access short-term loans to cover the shortfall.

If this is inconvenient and you don’t have a large amount of money of your own to invest, the advance self-build mortgage could be a more suitable solution.

In this case, the lender releases the funds at the start of each stage rather than at the end. This means the money will be readily available in your bank account when you need them, giving you a bit more flexibility.

Obviously, the advantage of getting the funds in advance comes with pitfalls. In fact, the cost of borrowing is typically higher, and you may have to pay a premium policy too, which can have a high impact on your financial situation.

You should also know that only a few lenders offer this facility, so your options may be quite limited when scouring the market for the right financial product.

How Much Can You Borrow?

Regardless of how much money you need, a lender will unlikely grant a mortgage if it is deemed unaffordable. Different lenders use different criteria when deciding if and how much to borrow you but generally they grant up to 4.5 times the single income for a single mortgage application.

Joint mortgage applications benefit from other criteria; most lenders will grant up to 3.5 time the joint income, or up to 4.5 times the highest salary.

It is easy to understand though that each bank or building society will calculate your borrowing limits according to their own affordability criteria. In other words, even if a lender has rejected your application, another lender may approve it.

How Much Will It Cost You?

Before applying to a self-build mortgage, you should also consider costs. Only because a lender believes you could afford their mortgage and agrees to give you the money, it doesn’t mean you should take them.

Interest rates on self-build mortgages could be as high as 7.5%, so if your net monthly disposable income doesn’t enable you to borrow funds based on this rate, you should wait until your financial situation changes.

What to Consider Before Applying?

The desire of building the home you’ve always dreamt of may push you to apply for a self-build mortgage. However, you should consider the following before contacting the lenders.

Build Costs

It’s common sense to approach a lender with a detailed plan of your intentions and incurring costs. You must know how much the land will cost you and what are the fees associated with the purchase, how much you’ll spend on project management and site preparation, on construction design and planning consent.

Add a minimum of 20% to the estimates, then present your project to banks and building societies.

Keep in mind that some lenders may require you to work on a fixed budget, while others may require a professional opinion regarding the costs.

Accommodation Arrangements

Building Construction

Building your own home comes with adjacent costs, such as finding alternative accommodation until the project is complete.

Some options will have no impact on your affordability, but others may determine lenders to take a step back. If you plan to live in rented accommodation, for instance, the monthly rental payments may reduce your ability to pay the mortgage.

If you have no other solution, check if your lender will approve you to make upfront rental payments; some banks and building societies will recalculate your affordability if you pay all rent in advance prior to the commencement of the works.

Construction Method

While no lender will give you money if the construction method doesn’t comply with the current Building Regulations, some may reject your application if they don’t agree with the construction method you plan to employ or with the terms and conditions you agreed with your supplier.

Before committing to a payment schedule with your contractor, make sure the lender agrees with all the terms and signs a mortgage agreement.

With this in mind, you can now start your self-build mortgage hunting. Remember that banks and building societies are keen to lend money on residential construction projects. So, if you calculated all incurring costs and are certain of your affordability, there is truly nothing that can stand between you and the home of your dreams.

To see what mortgage options are available to you visit our website.

Investing In the Housing Market or FTSE: Which is Better?

Investing your hard-earned money is one of the most challenging decisions you’ll face as a new investor. Should you invest in the housing market or FTSE? Both are good starting points for a novice and even provide similar returns. However, FTSE comes with a wealth of benefits that put off the housing market. Here’s what you should weigh in.

Risks

InvestingWhile it is true that all investments come with associated risks, some investments are simply riskier than others. FTSE means you could lose your entire investment, but you can lose nothing beyond that.

Things are different in the housing market. Buying a house usually means you can lose more than your investment if you finance your purchase through debt. House prices may also drop due to political instability, according to market specialists. In the worst case scenario, you could find yourself in negative equity should you have to sell the property.

At this point, the odds are 1-0 in favour of FTSE, simply because its risk of loss is lower than that of a buy-to-let property.

Diversification

Another category in which the housing market doesn’t excel is diversification. Buying a property won’t expose you to other companies, at least not at first unless you have some millions of pounds to invest.

The FTSE, on the other hand, gives you instant exposure to one hundred of the largest companies in the world without any real effort from your side.

Costs and Unexpected Charges

Your initial capital also plays a big role in deciding how to invest. The FTSE doesn’t require you a minimum initial investment. You can invest in shares as much or as little as you want without strings attached.

Dividends might not be guaranteed, but investors have shown that buying assets in a wide variety of companies usually leads to a steady income.

Investing in the housing market usually requires you to pay a big lump of money upfront. Property prices may have dropped in the last years, but they are still high. The property also comes with additional costs. As an owner, you’ll have to pay for building repairs and are responsible for maintaining the property in good conditions.

Liquidity

Housing MarketMany new investors believe that owning brick and mortar is a guarantee for liquidity. However, the contrary is true. Investing in FTSE means you can have access to cash whenever you want by simply selling your shares. If you invested your entire capital and your situation worsens, you’ll be able to get money back into your pocket with just a few clicks.

Things are quite different if you invested in the housing market. Selling a property is daunting to say at least, as well as time-consuming. You have no guarantee you’ll secure a good deal or that you’ll get your investment back.

It is also foolish to assume that by renting your property you’re guaranteed a steady income. In most cases this is true, but if the tenant’s situation changes and payments are delayed, you might have difficulties in getting your money.

With the new regulations protecting the tenants, it could also be hard to end the agreement and rent your property to someone who can afford timely payments.

Catalysts

It is no mystery that in one way or another all markets are at risk. That’s why you should truly consider the catalysts before making an investment.

The housing market has a strong positive catalyst, namely the shortage of supply versus demand. However, recent government schemes are encouraging people to invest in their own homes rather than renting. Think of Help to Buy or Rent to Buy schemes popular all over the UK. This means your returns could fall significantly should these schemes have a positive response.

The FTSE is closely linked to the global economy. Political events may trigger a fall in this sector, yet specialists still forecast an annual growth rate of 5% in the world economy by 2022. As such, the prospect of investing in indexes seems brighter than investing in the housing market.

Returns

Getting a profit is why you invest in the first place, so it makes sense to analyse your possible returns before making a decision.

To start with, you should consider the yield of each type of investment. A quick look to the financial markets will reveal the dividend yield is higher than the average yield offered by the possible income produced by a property.

Even if renting a home could seem like it gives you more money, you should also consider taxation.

Tax on dividends and tax on property income are very different, with the latter often costing you over 20% and up to around 45% of what you’ve earned. Account for additional expenses such as property maintenance and repairs, and you might not have such a great deal as you would have thought.

Depending on the amount you earn, tax on dividends can cost you less than 10%, and in any case, it does not exceed 40%.

Of course, the value of your actual tax bill will depend on many other factors, but overall, taxation on dividends is more efficient than taxation on property income, allowing you to retain a higher portion of your revenue.

And the Winner Is…

Undoubtedly, FTSE. While both markets can bring similar returns, investing your money in indexes takes all the burdens off of you. FTSE comes with lower risks, higher diversification, clearer costs, and no unexpected charges.

You will be able to get access to cash whenever you need it without waiting for months – or sometimes years – to sell your property.

Outperforming the housing market in all the points above, FTSE is perhaps your best bet. Ultimately, the choice is yours, and in the end, both markets offer great investment opportunities as long as you’re ready to deal with their challenges.

How Much Do Credit Cards Really Cost?

Introduction

Credit cards can often seem like an easy solution to that all-too-common problem; too many bills and not enough money. Then Christmas comes around before we know it and your credit card seems like the only way you can buy those must-have gifts. The same can be said for birthdays and other special occasions, and on top of all that there are also unexpected expenses like car repairs and appliance breakdowns to pay for. At times like these, when your monthly income is already accounted for with the usual expenses, and you need that extra help, your credit card can seem like the perfect answer. But is a credit card really the answer or is it adding to your financial problems?


Added Interest

It can be tough for a family who suddenly need to buy a new washing machine but don’t have the spare £200. Monthly payments of £20 or £10 would be much more manageable, but they may not realise they will be paying a sizeable amount in interest. Some people pay off their credit card balance in full every month, and in that situation they would not be paying any interest. But if you have a balance on your credit card and you take a look at your statement you may be surprised by how much of your debt is actually interest that has accrued.


Rising APRs

Recent information from Moneyfacts has revealed that credit card debt has increased, and the average Annual Percentage Rate (APR) is now reaching 23.1% (June, 2018). There has been a 1% increase in interest rates on credit cards provided by Lloyds Bank, HSBC, Halifax and Bank of Scotland. What is even more concerning is that while interest rates are rising, there are many customers having difficulties repaying their existing credit card debts. In the first three months of  2018 alone, credit card providers had written off a total of £318 million. In this instance, the company sells the debt but the customer is still required to repay it.


The problem with Minimum Payments

Everyone knows that all spending on your plastic adds to the bill and the debt increases. A common mistake amongst credit card users is to make the minimum monthly repayments towards the bill. However, each time you make the only minimum payment to your bill, the interest is adding up and your debt continues to rise. Even if you stop spending on your credit card completely, it could take you years to clear your debt by making only the minimum payments. This is due to the large amount of interest you would be adding to the debt.


How Minimum Payments are Calculated

Minimum payments are calculated by taking a percentage of the total balance. It is typically around two percent, or £5, whichever is higher. But this can vary depending on the credit card. Bear in mind that the minimum payment goes towards the interest and the amount that you originally borrowed. For example, with the £200 washing machine the minimum payment would usually be around £5 per month, and this sounds ideal to many people. Such a low minimum payment may seem insignificant, but on a typical 23.1% APR credit card it would take over two years to repay and cost over £100 in added interest. That’s more than half of the cost of the washing machine in interest alone.


Tempting Offers

Attractive offers such as 0%  interest offers for a limited time period, can be hard to resist. While this sounds great, it can end with a large interest fee being added to your bill if you don’t completely pay off your full balance before the the end of the limited time period. This is another lesson many credit card customers have learned the hard way. When you first take out the card you’re effectively borrowing for free as there is no interest. For many people, it is easy to get carried away and build up quite a balance, with a mindset that all you need to do is repay the balance before the 0% interest runs out. But that date fast approaches, and before you know it you are struggling to find the money to repay the full amount in time. Once interest charges are added to the account it can be difficult to repay the debt in full.


Downwards Spiral

You might think you would use a new credit card for a one off purchase then repay the balance, but once that plastic is available the temptation to use it is usually powerful; especially when the bills come in. This is a situation that is all too common with many credit card users. Using the card to fill a financial deficit between your income and your expenses can quickly result in a large debt. Once your bill reaches a significant amount, and you are still faced with your usual monthly outgoings it can be very difficult to find enough money to pay more than the minimum monthly payment. The combination of a high interest rate, an increasing debt, and low monthly repayments can quickly descend into financial chaos.


Other Options

If you find yourself in this position with a spiralling credit card debt, there may be other financial options available to you. For example you may benefit from paying the credit card debt off with a loan. Talking to an advisor who can discuss loan options with you is a good idea as they may be able to offer you a better interest rate. Additionally, with a loan you could also repay your debt quicker, making affordable monthly repayments that you and your lender agree on. If you do not have a credit card, but you are thinking about your financial options for some upcoming expenses, you should bear in mind the potential financial risks involved with credit cards and carefully consider other financial borrowing choices.


Summary

Credit cards are considered a popular way to manage borrowing and spread the cost of large expenses. However this is just a short-term solution that only gives the customer some extra time to repay the debt. Customers should be extremely diligent, as a growing credit card debt may overwhelm them and eventually cause a large dent in their finances.

The Importance of Having Life Insurance

What is Life Insurance?

Life Insurance ApplicationLife insurance is a policy that pays your dependants money as a lump sum, or as continual payments, when you die. It is designed to give you the peace of mind that your dependants will be financially secure after you are gone.This helps your family to cover funeral costs, and continue to pay the bills after you are gone. Like other insurance policies, such as car insurance and home insurance, it is paid on a monthly basis. The total money paid to your family depends on the level of cover you purchase. The amount you pay each month varies depending on the sum that will be paid out on your death. It may also depend on your health at the time of taking out the policy. Life insurance policies are available from a number of different providers and the terms of the policies can vary significantly. It is a good idea to discuss life insurance with someone who can give you advice on the policies available, to help you decide which one suits you best.

Do I Need Life Insurance?

As you get older you may get married, start a family and build your career. This is when you will likely start to consider the importance of life insurance. If your children, partner or other relatives rely on your finances to pay the mortgage and other bills, then it is highly likely that you do need life insurance, as the policy would protect your family financially after you are gone. A life insurance policy is essential in order to have a solid financial plan. Life insurance can be reasonably low cost, so policies are now available to more and more people. In addition it is reassuring to know that your family will be protected financially when you pass away.

How Much Does Life Insurance Cost?

Life insurance policies can be extremely good value. Many are as little as a few pence per day, and this is a very low price to take care of your family after you are gone. There are a number of factors that will affect the cost of a life insurance policy. The biggest factor is the how much you require the policy to pay out in the event of your death. A policy for £10,000 will have lower monthly payments than a policy for £30,000. Some companies perform a medical exam which includes your height, weight, blood pressure, blood tests and urine sample. It is also common to ask about your lifestyle habits with questions about exercise, smoking, alcohol intake, diet etc. In recent years, there has been a rise in the number of life insurance companies offering policies without a medical exam.

Look After Your Family

Looking after your familyIf you work full time and have a salary your loved ones will depend on your income for financial support. This is particularly true if you have a career with a high income. If your family rely on your salary as the main source of income for paying the bills then life insurance is vital for replacing your salary when you are gone. Families with children or disabled family members would find it incredibly problematic to manage without financial assistance. Two-income families can find themselves with not only less income, but new and demanding childcare arrangements, on top of dealing with grief. Raising children alone would undoubtedly be a challenge, and no amount of money can replace a parent. But financial security will go a long way in providing for children.

Funeral Expenses

Funerals are very expensive, with the typical value reaching over £8,000 for all expenses, according to the 2018 Cost of Dying Report. This includes the coffin and burial or cremation, doctor, memorial, notices, flowers, order sheets, transport, a venue, food and legal procedures. Even a basic funeral with no additions can cost around £4,000. Prices have gone up more than 50% since 2007, indicating that we face even further funeral price increases by the time we pass away.

Pay Off Debts

One of the biggest and most important financial commitments we make in life is our mortgage. The last thing your loved ones will need after you are gone, is to be burdened with a monthly mortgage payment without your financial assistance. If mortgage payments are missed and your loved ones fall into arrears, they risk having the home repossessed. This potentially puts your family at risk of becoming homeless. Therefore it is extremely important to ensure that mortgage payments will be covered in the event of your death, and a life insurance policy is the perfect way to do this. Any other other debts you have such as car finance, credit cards and loans, can also be taken care of with a life insurance policy.

Financial Security

As a parent it is important to know that you children are safe and this includes after you have passed. A life insurance policy will give your children the financial security to attend university, or start a business. They may use the money towards their first home or a wedding. This is especially useful if you don’t have any other financial assets to leave to your children. You can name your children as beneficiaries and make your life insurance policy their inheritance.

Peace Of Mind

It is impossible to know when we will die. Anything could happen at any time, and we have all heard stories of people taken passing unexpectedly. What we do know is that it is inevitable that at some point we are all going to pass away. It could be next week, next next month, or in forty years but it is a certainty. When we lose someone we love and we are experiencing grief, money will not take away the pain we feel. But having the finances taken care of during such a difficult and emotional time is vital. A grieving family needs financial security. A life insurance policy will give you that reassurance that your loved ones will be safe and secure after you’re gone.

For a no obligation life insurance quote please click here.

How Cheap Are Cheap Loans?

Cheap loans seem to have grown in popularity over the last decade or so. Many financial experts put this down to the financial collapse a few years ago. This drove the need for cheap loans to help out families that were in tough financial positions.

Even though the financial market has healed, we still see plenty of cheap loans available and being used. The question is, are cheap loans actually cheap? They’re touted as an affordable loan that anyone can buy to relieve them of financial distress. In this blog, we will take a look at cheap loans and figure out just how cheap they actually are.

The History Of Cheap Loan Rates

Loan rates change over the years and can become more or less expensive than they once were. By looking at the historical rates, it helps us see whether or not cheap loans are actually cheap. If they’ve gone up in price, then there’s an argument to be made that they aren’t cheap at all. But, if they’ve decreased then it’s a sign they’re cheap and getting cheaper.

Recent reports from earlier this year show that loan rates have dropped and will continue to drop. The figures show that the cheapest loan rates of gone from 7.5pc to just 3.3pc in the last two years.

Based on loan rates alone, it can be argued that cheap loans are actually fairly cheap. It will certainly be much cheaper to pay for a loan now than it would’ve been in days gone by.

Additional Charges

However, there are some additional charges that come into account with loans. This includes added interest when you miss a repayment date. There are some companies that hit you with huge penalty fees if you miss just one repayment date. Start getting a few penalty fees and the price of your loan can quickly add up.

There’s also one major issue at play here, what is considered to be cheap? A cheap loan for one person may not be affordable for someone else. It depends on the person’s financial situation and how much money they can afford to spend on a loan. The best thing to do is find a lender and then work out all the costs of the loan. Ensure you can afford the repayments so that you don’t end up incurring penalty fees.

In conclusion, cheap loans are cheaper now than they used to be. How cheap are they? It all depends on the size of the loan and the person applying for it. Regarding loan rates, there are some out there for as little as 3.3pc. This is a huge drop compared to prices in the past where they were sitting at around 7pc for the cheapest loans on the market. Consequently, yes, cheap loans have been made more affordable for people in Britain. Furthermore, there is a huge gap between the best loan rates on the market and the worst. Therefore, the best rates can be considered much cheaper than some of the other rates out there.

What is a Bridging Loan?

Some people have heard of bridging loans but still don’t fully understand what they are. A bridging loan is a short term funding option for people who need money quickly. They can be a short term loan in emergency circumstances, but mostly they refer to property transactions. The only thing with this kind of loan is that they can be more expensive than a regular loan. Let’s go into more detail:

What is a Bridging Loan?

This loan ‘bridges the gap’ for you between buying a new house and selling your old one. Some even use a bridging loan to buy a house at auction. This is because you will need the deposit money on the spot, but may not have sold your previous property yet.

The demand for bridging loans has risen in recent years, as people want to secure their dream homes as fast as possible. You should know that getting a bridging loan to buy a property without having a buyer lined up for your current property is a risky move.

A bridging loan can help those who will own two properties during the transition period and won’t have enough money to do so. The only way to get the best deal for a bridging loan is to make sure you find the right broker.

How do Bridging Loans Work?

There are two kinds of bridging loans:

  • Open – an open bridging loan has no fixed repayment date, but you will be required to pay it back within one year. If you go for this type, you can pay interest as you go along or when you pay it back altogether.
  • Closed – a closed loan has a fixed repayment date and is normally used if the sale on your old home hasn’t been completed yet but is in motion.

Pros and Cons of getting a Bridging Loan

Pros:

  • Flexible.
  • Option to pay interest later.
  • Quick arrangement.

Cons:

  • Fees, legal fees and broker fees.
  • High interest rates.

The company who gives you a bridging loan will need to see how you plan on paying them back. For example, with the money you make from selling your house. You’ll need to give plenty of details, including how you plan on selling your property and on the property you are buying. You’ll also need a plan B, so you must pre-empt your plan falling through and what you’ll do about it. It’s only a good idea to take out a bridging loan if you know you’ll be able to pay it back in a short time.

A bridging loan will usually come with terms of 1% of the sum borrowed, plus 1% every month after. When taking out £500,000 to pay for your dream home, this means you’d be £10,000 in debt in the first month. There are other options. You could potentially include the fees and interest in your mortgage.

Bridging loans aren’t the only option for you. It would usually be cheaper to take out a high loan-to-value mortgage. Bridging loans shouldn’t be your first choice.

If you are looking to take out a bridging loan, please visit our website and enquire online

Pros and Cons of Debt Consolidation

If you have found yourself with an amount of debt that seems impossible to pay, odds are you have been considering debt consolidation. What is debt consolidation and how could it help you in this situation? With debt consolidation, multiple loans can be added up to a sum that is easier to pay. Some of your debt will be paid off while the rest will be paid on a per monthly basis. However, before you jump on this possibility, you need to consider that there are both positives and negatives. Being aware of both will allow you to make a completely informed decision.

Pros

There are quite a few pros to using a debt consolidation loan. First and foremost, your debt immediately becomes easier to pay off. Rather than have a large sum of debt that needs to be paid, you can get rid of your debt gradually each month. The debt you pay will be more like a bill that is far easier to manage.

A debt consolidation loan also makes your debt easier to understand and handle. Right now, you have probably got debt from various sources. You might have borrowed from a loan company and had debt collect on your credit card. With a debt consolidation loan, it’s all collected in one, simple to understand lump sum.

With all these different money loans that you’re paying back, there will be a collection of interest rates. Some might be lower while others will be quite high. If you take out a debt consolidation loan, you’ll only be paying one interest rate. This rate will be a lot lower than what you’re used to and easier to manage.

Cons

Of course, it’s not all good news. When you take out any loan, there’s always the possibility that you accumulate more debt. In this situation, it’s because the loan frees up more of your money. You’ll be paying less each month on the money that you owe. This might sound like good news, but some people use the extra cash to borrow more money.

Also while the interest rate will be lower, you may end up paying more back. Look at the terms of your consolidation loan carefully. You need to make sure that you are getting the best deal available. It’s possible that you end up paying more because it takes longer to pay back.

A consolidation loan is an example of what’s referred to as secured debt. Essentially, this means you are tied down to paying the money back you owe per month. If you don’t make the payment on time, you could lose more than you bargained for. Your property could be repossessed, and some people even lose their homes.

Finally, through a debt consolidation loan, the lender takes your previous debts off your hands. They may not pay the money you owe, though. Instead, they might hold onto it, using it as capital to negotiate a lower cost for debt repayment. Despite the claims, not all debt consolidation companies are charities. Many are in it to make a profit. During this time, the money you owe is damaging your credit score, even though you’re paying it back.

As you can see, there is a lot of information to look at here. You need to think about the terms of the loan and who you’re borrowing it from before you make a decision.