Are zero per cent balance transfers better than low APR cards?

Not necessarily. Zero per cent transfers start with no interest to entice you and can be great in the short term to curb the amount of interest you are paying and consequently help you to get your finances in order.

You will usually find, however, that the deal only lasts for about six months, before the standard rate of interest kicks in again. Low APR cards, in the long term, can prove to be less costly in terms of overall interest.

That is why it is crucial to understand the small print and do the maths to see how the interest payments will affect you, in actual terms, over a longer period. So, in short, the low APR option regularly works out better in the long term.

What are the other benefits of a low APR card?

With these cards you can get a really good deal in the long term and stay ahead of the interest payments. Switching credit cards on a regular basis can also be detrimental to your credit rating. You also have the potential burden of fees on the balance transfer if you keep changing your card.

It is worth pointing out that if you are the sort of person that pays off most of your credit card balance each month, rather than just the interest, a low APR card is particularly beneficial for you. A zero per cent interest card is a better quick fix for those who are simply meeting the minimum payment each month.

Are store cards beneficial?

Store cards can only be used within the group of shops that the company owns whereas credit cards can be used everywhere, so it does limit you to an extent. The main bonus of a store card is that the company usually offers discounts on shopping and bonus points to give you better prices on the products within that chain.

They usually also offer low rates of interest, so they are good for you if you buy products from that company on a regular basis. For example, if you do your food shopping there each week, then a store card could significantly cut down your expenditure.

Can I get a new credit card if I have a low credit rating?

There is such competition out there among credit card companies that you will usually be granted a card even if you have a bad credit history or county court judgement against you. As long as you are earning a regular income you shouldn’t despair, as you will still probably be able to find something that suits your needs.

Even if you do get declined at first, the company will often lodge an appeal for you to see if the original ruling can be overturned. Remember, you are the lifeblood of such companies and your custom is important, so you hold all the aces.

Is a guaranteed credit card good for me?

A guaranteed credit card is essentially a pre-paid card so you can only spend what you have put in to the account. You will typically have to pay a fee for this service but the benefit of such a scheme is that you can’t get into debt with the company and you don’t usually need a credit check or even a bank account to get one. So it’s a good alternative to having to keep lots of cash on you.

The less interest you have to pay, the better off you will be in the long run; these cards therefore work well for people who want to keep a tight grip on their purse strings.

Financing a Car with a Loan

This is usually the first option that people take. This is because it offers the fewest risks and is usually the easiest to obtain. Loans are unsecured up to a certain amount – usually £10,000. You then have somewhere between three and 10 years to pay that money back. This offers you the best chance to make affordable monthly repayments without having to worry too much about losing your car.

However, there are downsides to loans. Because they usually come from banks or private lenders, not everyone is able to get hold of one. There are credit checks and the banks are now less likely to loan to someone who has a bad rating. At the same time, the banks are also less likely to loan to someone who is not in full time, stable employment. You should ask your provider all the questions before making an application.

Financing a Car with a Hire Purchase

This is an option available to most people, including those with bad credit and those who are in part time or self employment. The hire purchase is something that is taken out through the dealership and it gives you the ability to make monthly payments towards a car, without having to buy it outright in the end. You do not need to make the final payment – depending on the contract that you sign.

However, there are downsides to this option. The interest rates are usually high, due to who the dealerships allow to finance. Another downside is that the car is not yours until you make the final payment. The clue is in the word “hire” in the title. You are hiring the car until you pay for the full amount, so the dealership can repossess the car at any point if you fail to make the monthly payments.

Leasing a Car

Not bothered about owning your own car? Just want to drive the latest model for a few months to a year? You can do this by taking a lease out on a car. This is more beneficial than a hire purchase if you are just wanting to try out a car. The benefit is that you will not have to offer a deposit for the lease. The interest rates are usually much lower and you will not need to pay as much in the long run, which often means that your monthly payments are also much lower.

However, the main downside is that the car is not yours. If there is an accident, it will be up to you to repair for the damage – whether that is through your insurance or the insurance of the party at fault. You will also need to make payments for any maintenance that is required on the car afterwards and you are usually restricted to the mileage that you are allowed to do.

There are many options when it comes to car finance and the three above are just three options. Take your time to consider everything available to you and work out which one is best for your needs.

This is a guest post and views expressed here are entirely of the author. FinanceNet takes no responsibility for the content of external sites linked to from this page.

Firstly, different debts would have different consequences if you had problems paying them. For example, falling behind on unsecured debt repayments (such as a loan, credit card, or overdraft) may affect your credit score and/or you may get fined. Falling behind on your mortgage could lead to repossession (not at once, of course). For that reason, certain debts should be treated as a priority.

Secondly, depending on your income, debts and general financial circumstances, different debt solutions might be available to help you, such as the ones you’ll find at the Debt Advisory Centre.

Here, we’ll look at two ways to deal with debt – using your savings, or taking out a debt consolidation loan.

Using savings to repay debt

The amount of interest you could earn on any savings is (generally) significantly lower than the amount of interest you would be charged on a debt of the same size. For that reason, experts often argue that it’s better to repay debt with savings – as that would save you money overall.

While it does seem logical to repay debt with any savings you may have, at the same time it can be really beneficial to have savings in case a ‘rainy day’ comes along. As long as you can afford to keep making your regular unsecured debt repayments, you may decide there’s no need to repay your debts with savings.

Using a loan to repay debt

It may not sound very logical – borrowing more money to repay what you’ve borrowed already. However, a debt consolidation loan could make your finances much simpler.

There are two types of debt consolidation loan: secured and unsecured. Secured debt consolidation involves borrowing money against the equity in your home to repay any unsecured debts. A major advantage is that you could borrow the money at a lower rate of interest and spread the payments over a longer period. That could make your payments cheaper every month, but may cost more in interest overall (as you would be paying interest for longer).

However, before securing any debt against your property, consider that if you can’t make your repayments, your property could be repossessed.

An unsecured debt consolidation loan is simply a loan that is large enough to repay all your other unsecured debt (credit card, overdraft, personal loan) leaving you with one monthly payment.

You could lower your monthly payments with a debt consolidation loan, but again, spreading the payments over a longer period could cost you more in interest overall.

Anyone who applies for a loan will be credit-checked. Bear in mind that if you have had problems paying bills or repaying debt in the last six years, you may be turned down for a debt consolidation loan.

It’s also vital to consider whether you will be able to keep up with the repayments. If your income changes month to month or you’re already struggling to pay for everything you need, a debt consolidation loan may well not be right for you.

If you are having real problems with debt, it may be time to look at some of the other debt solutions that are available.

This is a guest post and views expressed here are entirely of the author. FinanceNet takes no responsibility for the content of external sites linked to from this page.

*It is important to note though that, while using a credit card in the correct way brings many benefits, poor planning and reckless over-reliance on credit cards can lead to far more negatives that outweigh any potential benefit. Be responsible when using a credit card, do not over-stretch yourself and know what your limits are.

In this article we will endeavour to guide you through the process of choosing the right credit card for your needs. We will discuss interest payments and how your choice of card can massively impact the amount you pay, credit limits, minimum repayments, balance transfers, reward cards, cards for people with bad credit and more.

Credit cards, in effect, allow you to pay for things in shops or online using cash belonging to the card issuer. This is different to how debit cards work where you can only ever spend your money (unless your account has an overdraft facility).

At the end of each month the card issuer will ask that you repay the amount you spent (or borrowed) on the card and will charge interest on your debt if you do not pay the balance in full (unless you have a 0% on purchases deal).

Working Out The Interest You Have To Pay

First of all it is important to remember that if you pay off your credit card in full at the end of each month you will not be liable to pay any interest at all so if you are able to do this then it is highly advised.

If you have a remaining balance on your credit card then you will be charged interest at an annual percentage rate (APR) set by the credit card company. It is these APRs that you should be using to compare credit cards on a basic level and all issuers are required to inform you of the APR when you apply.

It is commonplace for major banks such as Lloyds TSB, Santander and HSBC to offer their customers credit cards on a regular basis (indeed this is an even more regular occurrence with internet banking) but it must be said that they rarely offer the best deals in the marketplace.

A misconception that credit card holders often make when calculating the interest they will pay comes about when it comes to the date interest is charged from. While many card companies offer an interest free period during which repayments can be made without penalty, after this date passes interest charges come into play. While it may seem logical to assume that the interest is calculated on the balance from the day this period ends, it is more common for interest charges to be calculated from the date of each transaction.

So if you purchased your weekly shopping on the 1st of the month and didn’t pay off your credit card at the end of the month, you would pay interest on the grocery shop from the 1st and not from the date your statement is issued.

Your Credit Limit Needn’t Be Your Actual Limit

When you successfully apply for a credit card, the issuer will give you a credit limit based on various factors and this is the total amount you can borrow on a cumulative basis – i.e. it is not a limit for each month’s spending but rather a total amount owed to the issuer.

Some people are given a credit limit far above their needs or current monthly spend but it is important to realise that just because you now have access to a greater level of funding than before, YOU DO NOT HAVE TO SPEND TO THE LIMIT, in fact it is often very dangerous to do so.

The credit card company have calculated an amount that they believe it is safe to let you borrow based on your credit history among other things but you should be aware of your own financial situation and your ability to pay back the amount your spend at the end of each month.

Your credit limit is subject to change. Card companies will occasionally review your personal circumstances and, based on your history of repayments and changes to your credit file, they may increase your limit. You can also request an increase from your credit card issuer at any time though they will only agree if the figures show an increased ability to repay what you borrow.

Minimum Payments – What You Should Know

Come the end of each month you can choose how much to repay on your credit card (the best outcome being a full repayment of course) but card issuers will almost certainly insist that you fulfil a minimum repayment which will usually be the higher figure between a percentage of your spend and a fixed amount set by the card company.

These minimum payments are often very small in size but not paying them can result in more expensive penalties either in the form of charges/fees or in the respect of losing certain benefits you received when you signed up (for instance they could take away your 0% on purchases or balance transfers and revert your account to the standard rates which will be much higher).

It is never advisable to only pay the minimum amount on your credit card bill as this will result in further interest accruing on the remaining balance. Even if you cannot repay your bill in full it is advisable to repay as much as possible to avoid the interest building up into a “problem amount”.

Choosing The Right Card – It’s A Matter Of Repayments

When you are looking around for the best credit card deal you need to think carefully about your ability to repay and indeed whether you intend to pay off what you spend straight away.

Getting The Best Introductory Rates

If you don’t think you are going to be able to pay off your credit card bill at the end of each month then you should find a card with a low standard rate or preferably one with a 0% on purchases introductory offer.

If you have outstanding credit on an existing card then you might be able to defer your repayments by getting a new card with 0% on balance transfers. If you are currently paying interest on your existing balance then you can cut this down dramatically with a 0% balance transfer card and actually begin to pay off the balance rather than watch it grow each month.

You will probably have to pay a small fee for transferring your balance to the new card (2.5% isn’t uncommon) but this one off charge will almost certainly leave you better off in the long run as you reduce your balance and thus the interest payments you were forking out for on your old deal.

If this 0% period runs out and you still have an outstanding balance to be paid simply look for and switch to another card provider offering a similar interest free introductory offer.

If your new card has 0% on balance transfers but not on purchases, it is quite ok to have more than one credit card so find one that has 0% on purchases and use that for buying things and the other simply as a method for repaying your debt.

Cashback, Rewards, Air Miles & Other Benefits

If you have ever wondered why people with sufficient balance in their bank account use credit cards rather than a debit card the answer is simple: you can get a great number of extras and incentives when you use a credit card.

Cashback Cards

The most obvious form of reward that card issuers can give their customers is cashback. What this basically means is that for every pound you spend on your credit card, the issuer will give you back a small percentage. This percentage can be as high as 5% but this might only apply to the first few hundred pounds your spend on the card after which the cashback reduces considerably. Other cards will offer a fixed 1% – 2% for spend that occurs in supermarkets for instance or certain department stores while offering a lower percentage for all other purchases.

Air Mile Credit Cards

Another very popular type of reward, especially with regular travellers, is air miles whereby you receive a certain number of miles free travel for every pound you spend. Big spenders can find themselves jetsetting across the world for free if they build up enough miles. Be mindful that some air mile cards limit which airlines you can fly with so look for one which covers multiple airlines and the routes they encompass.

Store Cards

Certain big supermarkets and department stores have their own credit cards which give you points for every pound you spend. The number of points you receive for shopping in that stores usually outweighs the points received for all other general shopping which is a way to encourage you to shop with them over their competitors.

If you regularly shop there anyway, these types of store credit cards can actually be a good option assuming you pay them off each month (as their interest rates are hardly the best on the market).

Other Benefits You May Receive

Some credit cards will offer even more benefits but be careful, these cards may charge annual fees for the privilege. Some additional benefits may include:

• purchase protection insurance
• extended warranties over and above the manufacturers warranty on certain electrical items
• a very basic form of travel insurance

Choosing A Credit Card When You Have Bad Credit

If you would like to have a credit card but have bad credit you have to look at a special set of cards.

Certain card providers such as Vanquis do offer credit cards to people with bad credit but will charge a much higher rate of interest.

You might be asking yourself why you would want to opt for a card with such an interest rate over just using cash but used in the correct way these cards can actually be used to build you credit rating up again if you repay what you spend every month.

Alternatively you could opt for a prepaid credit card which will not charge you any interest because you have to load up the card with funds before you can use it. They are common among young people and are also useful when travelling abroad. Read our complete guide to prepaid credit cards here.

How Do They Work

A pre-paid credit card works in much the same way as a mobile phone top up, gift card or underground travel pass. You pay a certain amount into the card’s account, which is then available to spend on the card.

This means that, unlike a traditional credit card, using a pre-paid credit card does not involve borrowing any money. The available balance is made up entirely of your own money, rather than the card providers. So, no matter what you do, there is no chance that you will put yourself into any debt, you will simply run your credit down.

The cards are also very convenient, allowing you to access funds from ATMs, buy goods online or in stores without having to carry cash around.

Control

The sting in the tail with a regular credit card is that the interest the mounts up on a negative balance. Not only is there the temptation to use money which is not yours to buy things you can’t afford, there’s the added cost of the interest, which will keep growing the longer you fail to repay it. This is one way people spiral into debt.

This is not possible with a pre-paid credit card, as there is no interest and the limit on the card is dependent on how much you choose to put on it, making it the ideal tool for those determined to draw up a budget and stick to it.

For the same reason, pre paid credit cards can be a great way for parents to teach their teenage children about money and spending. It will give them the freedom to withdraw cash from ATM’s and to spend in shops, but it also places strict limits on their spending.

On the other hand, if you want to make sure a loved one does not run out of funds, if they are out of reach or travelling, pre-paid cards are ideal, as you can top up the balance for them without needing to have the actual card.

You can top up pre-paid cards with money by transferring money from a bank account, paying in at a Post Office branches or any of the many convenience stores around with PayPoint or Payzone signs displayed.

Security

In these times, when credit card fraud is becoming an increasingly widespread problem, the added security of using a pre-paid card is very attractive. As with a credit card, a fraudster would need all of the cards details and the PIN number to access funds, but there also a number of other safety factors that come with a prepaid card.

For one thing, as the balance is limited to what you place on a card, even they get the card’s PIN a fraudster could only spend that set amount. He couldn’t run you into debt, empty your account or give you a massive credit card bill. On top of this the card can be cancelled instantly if you inform the provider that it is missing.

When you do this the provider will supply you with a new card and, what is more, the funds remaining on your old card will be transferred to your new cold, effectively snatching your money back from the thief and replacing it in your hands, where it rightly belongs, something that very rarely occurs when cash is stolen.

However, with pre-paid cards you do not get Section 75 protection, which entitles you be refunded for purchases worth between £100-£30,000 if the goods aren’t delivered or aren’t as described.

Foreign Travel

Pre-paid credit cards are now extremely popular with people going abroad as they often have very competitive exchange rates and, as they are an effective budgeting tool, are very good at ensuring you don’t go overboard when you’re abroad.

As well as normally having better exchange rates than most high street banks, they are also often immune to the expensive charges associated with using a card abroad.

The fact they are not linked to your bank account make them more secure than carrying a card in countries where card cloning scams directed against tourists are common. Needless to say, they are also preferable to carrying lots of hard currency.

Poor Credit

As there is not usually any borrowing involved in using a prepaid card, there are also no credit checks involved in the application stage. This means that, provided you can pay the application fee (normally about £5-10, if there is one) you are guaranteed to be accepted, regardless of your financial history.

Whilst the majority of prepaid cards will not affect your credit score, there are some which are specifically designed to help boost your credit score. These work in a very simple but affective way.

Some pre-paid cards will charge you a monthly fee for their use. Instead of doing this, pre-paid cards designed to build your credit will give you an interest free loan, which you then pay back in monthly instalments, equivalent to what you might have otherwise paid as a fee.

This will boost your credit score as it will show you can handle a loan, but you still don’t run the risk of overspending on your card or wracking up lots of interest. Just think of it as a fee for your card that also boosts your credit score!

Charges

There are various charges associated with the use of a pre-paid cards. There is the cost of acquiring the card, this can be up to £10 but is often cheaper, or even free.

You can also be charged for a transaction fee for using your card. Many cards have no transaction fees at all. These come recommended as transaction fees normally end up being the biggest cost of using the card. Others have limited small charges for each transaction. However, there are cards that charge a % transaction fee, normally about 3%. Watch out for these, especially if you are thinking of making big purchases as they will really cost you.

Finally there are some cards that charge a monthly fee for using the card, but many do not, which is obviously preferable.

Two charges that are very consistent are the top up and withdrawal fees. These are the amounts you are charged when you load the card with money or take it funds from a cash machine. These can be charged as flat rates or as percentages. Again, the most cost effective way to handle this is to avoid percentage charges, and pay in/withdraw larger, infrequent amounts, rather than regular, small amounts.

You should compare all these costs when picking the card for you.

Moneysavingexpert.com provide another great read all about prepaid cards in case we have missed anything out here on FinanceNet.

How credit counseling works

If you go for credit counseling, the counselor will first analyze your financial obligations and your affordability. So, when you go for the first time for the meeting with the credit counselor, you will have to carry along all your financial documents. The documents can include your loan statements, your bank statements, the credit card statements, your pay statements. In addition to this, you can also make a list of all the outstanding debts that you have and the amount of all the debts and the minimum monthly payments that you are required to make on each. Your credit counselor can then offer you the right financial advice based on these facts and figures.

In general, in case of the reliable and legitimate credit counseling, the companies or the agencies have certain criteria that you are required to meet in order to join their credit counseling program. The criteria usually include things like your income and the unsecured debts that you need help managing. No credit counseling company will be able to help you in managing your secured debts for example your mortgage loans or car loans.

So, the credit counselors help you to get out of the debt problem that you are in. The counselor as said before analyzes your finances and then guides you in budgeting and managing the debt payments.

The credit counselors can also offer you some debt relief options that can help you to pay off your debts. There are in fact various debt relief options like debt settlement, debt consolidation and even debt management. In case of debt settlement the outstanding debt amount lowers but on the other hand, in case of debt consolidation, the interest rate on your consolidated debt lowers. Majority of credit counseling companies offer you debt management. In case of all the three, the credit counselor negotiates with your creditors to lower the debt amount or the interest rate on your debt. In case of debt management, the additional help that you may get is the waived off penalty fees. But in all the three cases, you are required to make the monthly payment to the counseling agency. They will then forward the payments to your creditors and help you in becoming debt free.

This is a guest post and views expressed here are entirely of the author. FinanceNet takes no responsibility for the content of external sites linked to from this page.

It’s a fact of life that, inevitably, we all meet with unexpected expenses from time to time. If this happens in-between your benefit payments things can get a little too close for comfort.

One of the most effective ways to fashion yourself some breathing room is by taking out a short term loan. However, there are a number of things to consider first.

Interest Rates

You will find it practically impossible, especially in today’s financial climate, to get a loan from a major bank. If you are considering getting a loan whilst on benefits then, unfortunately, you will have forget about the interest rates you have seen advertised on the high street.

The lenders you are more likely to secure a loan from operate in what is known as the “sub-prime” market. Whilst you may be used to hearing of interest rates between around 10%-20%, the typical APR on a loan form a sub-prime lender will be somewhere from 500%-4,000%. Some are in the tens of thousands.

For this reason it is best to borrow on small amounts for very small periods of time, otherwise the amount owed will rise rapidly and you may risk defaulting your repayments. This will impact on your credit rating.

Loan Amounts and Guarantors

If you are unemployed the absolute largest amount you are likely to secure a loan for is £3,000, however, only very few lenders offer this much to people who are on social security. Their interest rates are very high and their collection policies are inflexible, meaning if you are unable to keep up with repayments, which realistically, considering the APR, is likely, you’ll be facing all sorts of trouble. Event then, these lenders will only lend an amount such as £3,000 if you have a guarantor.

A guarantor is somebody who is willing to make your repayments for you should you fail to do so. It can be anybody but it is normally a close friend or family member. Being a guarantor is a big commitment as they are making themselves legally liable to pay off the loan if you can’t and as such guarantor loans need to be thought about carefully.

Furthermore, they will need to have a job with a decent income and a good credit history, as they will be credit checked by the lender. This means they can’t have received a CCJ or defaulted a payment in the last six years, or be on an IVA or be bankrupt.

If you are lucky enough to have someone willing to stand as a guarantor for you, it’s worth figuring out between you if it would not be wiser for the guarantor to get a loan in their name and then lend to you as a friend. This is also a big commitment but may ultimately be cheaper and there are typically more lenders for people with good credit then there are guarantor loan lenders.

For one thing, with their good credit history and income, they should be able to go to a high street lender and get a loan with a considerably lower APR. Secondly, high street lenders can be easier to negotiate with if you run into any troubles and so will your friend/relative.

If you don’t have a guarantor, which most people don’t, you’ll find it hard to get more than £1,000.

Credit Checks and Credit History

Your credit history is also going to be a factor. If you receive a County Court Judgement (a court order to pay an outstanding bill or debt) or receive a default notice (a letter from a company which comes after a final warning to tell you that you’ve defaulted, or failed, to pay outstanding monies) both of these will stay on your credit history for up to six years, limiting the amount you can borrow and the types of lender you can approach.

There are a number of websites that you can go to in order to find out exactly what your credit score is and what is on your credit history. You normally have to pay for this service, however, it is worth doing. Many people who have received default notices don’t know about it, often losing the actual notice itself amongst other bills and documents.

Some short term lenders may not credit check you at all, but be honest with yourself. Will you actually make repayments on time? If not, don’t get the loan. These same short term loans are generally loaded with lots of extra fees and charges for failed and late payments. This is on top of the interest so be sure you can pay on time.

Secured Loans

A secured loan is where you, the borrower, have to provide collateral to the lender as a kind of deposit for the loan. One particularly common form of secured loan offered to people on benefits or with poor credit are loans secured against cars. This is good news if you have a car or some other form of capital, as it opens up the option of secured loans to you.

However, if you fail to keep up repayments you will lose your car. Losing capital is the last thing you need when you’re already in a tight spot, therefore you have to asses the risk you are taking very carefully.

In other instances you may be asked by a lender to pawn some of your possessions in order to get access to a loan. This is similar but less risky as you know where you stand and, generally, the possessions will be worth less than a car. Again the interest rates are very high, so there’s no point sacrificing your possessions if you can’t afford the repayments anyway. You’d be better of selling them for cash. The amount raised would be smaller but at least you’d avoid accruing interest or harming your credit rating.

In this article I am going to walk you through the 4 main options that you have open to you. I’ll try to give an honest overview of their various pros and cons and guide you to the option that best suits your needs. I’ll try to include relevant information on rates of interests, fees and charges and give representative examples of how much you will repay over the term of the loan.

So, let us begin.

Option 1 – Payday Loans

As the most well know and the most widely advertised of the short term loan options, payday loans have become a common feature in society but the have not been without their scandal. There have been warnings from many bodies responsible for family finance advice, primarily because of the very high typical APRs applied to the product.

There is a good reason for this though – the purpose of such loans is usually to cover a very short period where an individual requires quick extra cash and the loan is typically unsecured. The name “payday” comes about because that is what most loans are for – to cover outgoings between now and the next payday of the individual.

So how much will you pay in interest?

Well it depends on the institution you borrow from but one of the market leaders, Wonga, have a representative APR (annual rate of interest) of 4214% but because you can only borrow the money for up to 30 days the actual monetary values look more reasonable.

At the time of writing, a £400 loan from Wonga for a period of 10 days will leave you with £445.49 to repay in total over the term which is 11.37% in interest.

I believe that looking at things this way actually makes payday loans look a bit more reasonable.

Short term payday loans are best for: people who require fairly small loans at very short notice as decisions can be instant (mostly online with no need to fax documents) and the money can be in your bank account in as little as 15 minutes.

Option 2 – Cheque Based Payday Loans

There are a few operators in this market which differs quite significantly from more traditional payday loans. With cheque based loans, the borrower is required to send a copy of a cheque guarantee card along with a few blank cheques that the loan company use as collateral should you fail to repay your loan in the period agreed upon.

The benefits of this type of service is that you generally benefit from much lower representative APRs meaning the overall cost of borrowing is less.

For example, at the time of writing, Mister Cheque offer a representative APR of just 295.74% which is a great deal cheaper than the Wonga example stated earlier.

Some companies also allow you to complete the process without any credit check which can be great for those with bad credit ratings or CCJs.

The cons are clear though, because you have to physically post documents to them, the cash is unlikely to hit your bank account for at least a day (assuming you post them first class). The extra effort required on your part is reflected in the lower rates though.

Cheque based payday loans are best for: those who can afford to wait a day or two for the cash to hit their bank account.

Option 3 – Logbook Loans

Security statement: a Log Book Loan is secured on your vehicle.

This type of credit is provided to those who have a car or other vehicle against which to secure it. Since this loan would be secured against your vehicle, if you fail to keep up the payments, you are at risk of having your vehicle seized and sold to repay the remainder of your loan.

The downsides of this type of loan are clear – you can lose your car.

The advantages of this type of loan are that you can get a larger loan in comparison to the previous 2 payday options (up to £50,000) and that because the loan is secured, you do not have to undergo any credit checks.

A representative APR from Logbook Loans is 478.30% which is by no means the lowest rate you can achieve but with repayment windows ranging anywhere from 1 day to 48 months, you can at least schedule the repayment for further in the future if you should wish.

Logbook loans are best for: people who require slightly more credit that a typical payday loan can provide and that have a car that they can, if the worst comes to the worst, managed without. For those people who are unemployed or who have bad credit, this option allows you to get a loan thanks to the security you are putting up (APR 478.3% Representative).

If you use your vehicle for work purposes of consider it vital to everyday life, a logbook loan is probably not for you.

Option 4 – Pawnbrokers

The pawnbroking industry has been seen on our high streets for many years but in recent times it has gone online too. Now you can complete the whole process online if you should wish with companies such as Borro.com.

The principle of pawnbrokers is that you exchange your valuables in exchange for a loan with a valuation agreed upon by both parties. The valuables are then held as security against that loan in the case of non-payment on your behalf.

With online services, you can pawn items ranging from jewellery and watches to art and even cars. Any item of significant value may be considered as security by the pawnbrokers. The security means that no credit checks are required.

Services such as Borro.com tend to lend on a month-by-month basis with interest rates dependent on the loan. At the time of writing, Borro.com are offering a 6% monthly interest rates on loans up to £999 which is an APR equivalent of just 85% which is much lower than other services reviewed in this article.

So the obvious pros are that the interest rates charged tend to be much lower than other short term loan options and there are no credit checks.

The biggest con is that you have to give up possession of your valuables for the period of the loan. And if you are unable to repay the loan then you will lose those valuables. You are also are the mercy of the pawnbroker when it comes to the valuation of your valuables and you might not get realistic market value for them.

Another con is that the items have to be handed over before the loan reaches your bank account so it’s certainly not as fast as some of the other options displayed here.

Pawnbrokers are best for: people who have valuable items that they are willing to put up as security in return for better rates on the short term loans. As with logbook loans, because of the security you are putting up in the form of your valuables, people with bad credit histories, CCJs or who are unemployed are still likely to be accepted. Furthermore, loans for people on benefits are not out of the question either.

In Summary

If you need cash fast – go for a traditional payday loan from Wonga.com

If you want the lowest rates – pawnbrokers such as Borro.com are you best bet

If you want low rates but can wait a day or two – a cheque based payday loan from Mister Cheque might be appropriate

If you want larger cash sums and have a vehicle to secure against – a Logbook Loan is the way to go (APR 478.3% Representative – a Log Book Loan is secured on your vehicle)

UK Mortgages

There are two mortgage options available for individuals, these being the repayment plan or the interest only plan.

Repayment Mortgage

The repayment plan consists of monthly payments in order to pay back the borrowed amount as well as any interest that has been accrued. There are several advantages and disadvantages to the repayment mortgage plan which should be considered before making a mortgage decision.

Some of the advantages to the plan include the fact that once the mortgage term is completed, no more additional debt is owed. In addition to this, with this plan, overpayments can be made in order to decrease the amount of interest and capital amounts of debt.

In addition, unlike interest only mortgages, this type of mortgage does not always require life assurance. Although these are all positive aspects of repayment mortgage plans, there are also a couple of disadvantages. Some financial institutions require additional financial compensation if overpayments are made. In addition, although there might not be a requirement for life assurance, the mortgage still needs to be paid should the owner of the mortgage die before the completion of the payments. This sometimes results in the property being sold by family members who are not able to pay off the rest of the debt.

Interest only Mortgage

As opposed to repayment mortgage, the interest only mortgage plan involves the monthly payment of only the interest. In other words, the payments do not pay off the actual balance of the debt. In addition, the borrower takes out an endowment policy, Individual Savings Account (ISA), or pension plan. These act as a “repayment vehicle” by which the balance can be eventually paid.

The first and most common type of interest only mortgage is the endowment policy. This type of mortgage provides both a fixed payment as well as life assurance. Each of the payments takes into account both the capital amount of the loan as well as the term of mortgage so that, at the end of the term, the amount generated through payments and earnings is enough to pay off the entire debt. Because the endowment policy provides life assurance, the death of the borrower would result in the mortgage being paid off.

The ISA or Individual Savings Account is the second type of interest only mortgage and allows for borrowers to save in a tax free manner. The ISA is a more complex form of repayment vehicle so it is not recommended that a borrower utilize this plan unless they are financially apt or have a professional advisor for their finances.

The last type of interest only mortgage plan consists of payments being made monthly into a pension plan. Like the endowment policy, life assurance is provided which means that the mortgage will be paid should the borrower die before the debt is eliminated. The debt is paid by using the tax free cash from the pension fund. The borrower is then able to take a pension from the remainder of the funds. Like the ISA plan, the pension plan should only be utilized by those who have access to a professional financial adviser.

As is the case with the repayment mortgage plan, an interest only mortgage also has its pros and cons. Some advantages are, for example, that if the amount of money in the fund exceeds what is required to pay the debt, the borrower is able to receive the remaining funds as a lump sum. In addition, some of the plans allow for tax free money to be set aside for payment use. There are, of course, accompanying disadvantages.

One such disadvantage is that there is no guarantee that the correct amount of money will be available in the fund at the end of the mortgage term to pay off the debt. Despite this, the borrower is still responsible for any balance of mortgage debt. Another disadvantage is that, if one were to prematurely cash in the plan, a financial penalty may be inevitable.

Interest Rates on Mortgages

Once a type of mortgage has been decided on, the next step is to choose an option for mortgage rates.

Fixed Rate Mortgage

A fixed rate mortgage is one in which a specific interest rate is set for a period of time. The rate during this time period will not change regardless of whether or not the interest in the market increases. It is only after this specified period that the interest rate will be adjusted to the SVR or Standard Variable Rate.

With this form of mortgage, lenders will typically charge an initial fee at the start of the arrangement as well as an Early Repayment Charge or ERC should the borrower choose to pay their debt earlier. Some lenders will even have their ERC last for a period longer than the fixed rate so as to ensure that the institution will not lose out on interest charges.

Capped Rate Mortgage

The second form of mortgage rate is the capped rate which means that if the interest rates decrease, the borrower pays the lower rate. However, if the interest rate increases, the borrower is required to pay no more than a set “cap” rate. This is the most desirable mortgage rate.

Discounted Rate Mortgage

With the discounted rate, the lending financial institution provides a discount for a set period of time. The discount is set to a specific percentage meaning that, if the Standard Variable Rate or SVR increases, the rate will increase but will still remain discounted by the set percentage. As is the case with the fixed rate plan, the lender may charge up front fees or charge an Early Repayment Charge. One disadvantage to this is that the lender may offer a large discount for a short period of time and then dramatically decrease the discount percentage.

Variable Rate Mortgage

This rate varies with the SVC or Standard Variable Rate.

Tracker Rate Mortgage

The tracker rate mortgage is a form of variable rate which rises or falls a certain percentage amount above a certain base rate such as the London Interbank Offered Rate (LIBOR).

Features and Other Benefits Offered with Mortgages

Flexible/Lifestyle Mortgages

With a flexible/lifestyle mortgage plan, a borrower is able to make extra repayments or skip a payment depending on their needs. Typically, lenders do not allow borrowers to skip or reduce payments if they have not already established a surplus through overpayments.

The benefit of the flexible mortgage is that, instead of being charged interest annually, the interest is calculated daily so an overpayment immediately adjusts the balance of the debt. This effectively reduces the interest. The typical flexible mortgage is not accompanied by an Early Repayment Charge and the interest rates are usually lower than the market rate.

Offsetting

Mortgages, known as Current Account Mortgages or CAMs, combine the benefits of a flexible/lifestyle mortgage with funds located in a savings and/or current account to offset accrued interest. This means that interest is charged on the mortgage balance minus the amount located in the account. If the borrower chooses to offset their mortgage using this method, they should be aware that the money in their accounts will not receive interest.

Cashback

The lending financial institution will occasionally offer a cash incentive when the borrower chooses to take out a mortgage. The amount of the lump sum varies depending on the lender as well as on the amount of the mortgage.

Some lenders will offer up to a 6 percent cashback incentive which, with a normal sized mortgage, would result in a significant return. These cash incentives can either be given as a flat lump sum in a set amount or as a percentage of the mortgage amount. In the majority of financial institutions, the cashback incentive is delivered as a continuous benefit such as a discount. However, there are some lenders who will distribute a pure cash sum. However, with the incentive of a cashback, lenders often apply an Early Repayment Charge for a period between five to seven years in order to ensure that the lender does not lose out on large amounts of interest.

Free Legals or a Contribution Towards Conveyancing Costs

In order to gain the benefit of these advantages, the borrower of the mortgage is typically required to utilize a soliciting firm or a licensed conveyancer chosen by the lending financial institution. This is typically done during the remortgaging process although it can also be used as a mortgage “enhancement”.

Free Valuation or Refund of Valuation

A refund of valuation can occur once the application of the mortgage has been completed whereas a free valuation does not require any payments. Therefore, if one pays for a valuation but does not go forward with the mortgage due to a bad valuation, for example, the refund will not be made.

Other Benefits

Other benefits and incentives that can be included with a borrower’s mortgage include no Early Repayment Charge and no Higher Lending Charges from the lending financial institutions.

Mortgage Resources

Remember your home is at risk if you fail to pay your mortgage the UK government offers Mortgage help online with good advice.

The Council of Mortgage Lenders states on their site “policy work provides a vital link between lenders, government and other key stakeholders. We work with the industry to identify and communicate policy across a wide spectrum – from valuation issues to arrears and possessions. Our policy pages will give you an insight into our key policy positions through to our written communications to ministers, civil servants and other policy makers or influencers”.

FinanceNet hopes you found this guide informative.

The main credit card issuers are Visa, MasterCard and Amex.

Credit cards are the actual payment instrument used by a cardholder in a retail or online establishment to purchase goods or services that allow them the option to pay in full at a later date, usually a maximum of 59 days credit before any interest payments are due.

For providing credit, card issuing banks and institutions are paid a fee, in the form of interest which a cardholder will pay in addition to the principle balance owed for the original purchase.

There are different types of credit cards available.

• A traditional credit card is one where purchases can be made, and then a payment is generally due on a set day every month. You can choose to pay the balance in full at the end of the billing cycle, or “revolve” the balance by paying a minimum payment and allowing the bank to charge interest on the remaining balance. This type of card that most consumers carry.
• A charge card is a card that may or may not have a limit, but payment in full in required at the end of each month. There is generally a fee charged to carry this card, since revenue is lost by not allowing cardholders to revolve their balance.
• Then there is a purchasing card. This card is a hybrid between a charge card and a credit card. The terms set up by the card issuing bank will allow the balance to be revolved, but not indefinitely. At a specified time, card aging card balances must be paid in full to avoid having the card restricted. These cards are usually used by businesses to monitor company paid charges by employees.

Having a credit card can benefit a cardholder in several ways:

• They allow purchases, especially emergency or unplanned purchases, to be made without interrupting cash flow.
• They allow flexibility in making larger purchases, making it easier to pay for goods or services that may not have been otherwise attainable.
• They allow for ease in travelling by allowing a traveller to pre-arrange hotels, flights and restaurants.
• They mean you don’t have to carry large amounts of cash to make purchases.
• They protect your purchases against fraud, as large transactions are guaranteed by the card issuers like MasterCard, hence you can claim your money back if goods or services you have paid for on your card fail to turn up.

The main difference between UK and US credit cards is their use. All three types of cards are available in both countries; however, the UK prefers to utilize charge cards, paying off balances at the end of the month, while Americans tend to revolve lines of credit, amassing debt.