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

cheaploans1Loan 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.

cheaploans2There’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?

bridging1This 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

debtconsol1There 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.

debtconsol2Also 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. Take a look at our website for some help – https://www.ukhomeandpersonalloans.co.uk/loans/debt-consolidation-loans/

What are Bad Credit Mortgages

For most people, owning a house is only possible by borrowing the money to buy it. Mortgages are a long-term home loan product that gets taken out by thousands of people each year in the UK. Typically, lenders agree to fund home purchases and get repaid over a period of 25 years or so.

These days, the criteria for getting accepted for a mortgage is quite high. There’s no denying this is thanks, in part, to the credit crunch. Many applicants find they cannot get approved for a mortgage nowadays. The reason is usually down to problems with their credit rating or score. To solve that problem, applicants can apply for what’s called a “bad credit” mortgage.

badcredit1What is a bad credit mortgage?

A bad credit mortgage is a type of loan aimed at applicants that don’t have a good credit score. These are often people that fail credit checks with mainstream lenders. The mortgages offered are sometimes known as “subprime” ones.

They are ideal home loan products because they help those with poor credit histories buy a home. Bad credit mortgages are also a welcome boon with people that have no prior credit history. For example, individuals that have just moved to the UK from abroad.

What is bad credit?

badcredit2In the UK, each person has a credit rating. It can vary from poor to excellent. Many variables impact how good or bad one’s credit score is. For example, missing repayments on loans can have a negative impact. But, making repayments and not having too much credit can ensure you have a good rating.

Sometimes, other issues can define a person as having a poor credit rating. These range from having no credit history at all to identity fraud. When a person has a bad credit rating, it can often take a long time to put things right. In the meantime, they can find it hard to get accepted for credit from mainstream lenders. Even a person’s own bank may decline them for loans and credit cards.

Here are some other examples of what can cause a person to have a bad credit rating:

  • Bankruptcy (including IVAs and debt management plans);
  • CCJs (County Court Judgements);
  • Missing repayments on loans and credit cards.

What’s the difference between a “bad credit” and standard mortgage?

The mortgages themselves are the same financial products. You apply for a bad credit mortgage to buy a home, just as you would a conventional home loan.

So, if they are the same products, why do they have different names? The only differences between the two are the interest rates and fees. With bad credit mortgages, they tend to be higher than normal. That’s because of the higher perceived risk with lending to someone with a bad credit history.

In some cases, you may also need a bigger deposit for your home. Most people have a higher chance of approval for bad credit mortgages with 30% deposits. Although, it’s possible to get accepted with deposits as low as 15% of the home’s values.

Where To Invest Your Money

Knowing where to invest your money is a challenge. There is no shortage of options out there, but which is the best for you? It depends on how much you have and how hands-on you want to be as an investor. Here are five top options to consider.

Property

invest1Investing in property is still a good way to make money, and that’s why so many people are trying it out. Becoming a buy-to-let landlord is certainly not an easy job. There is a lot of work involved. But if you do it right, you can build a property portfolio and build a regular stream of rental income. Homes are solid assets as well, so some of that risk is taken away. It’s not like stocks that can just collapse and leave you with nothing at all.

Art

The art market is still booming like never before, and you should become a part of this if you want to make money. Of course, you’re probably not going to find a masterpiece for a low price. But if you’re willing to shop around and invest in up and coming artists, you could make big money in the future. You might not make big profits to begin with, but once you learn what it takes to make money from art, you will see the money come rolling in.

Collectibles

Collectibles are a big deal these days. People like to collect all sorts of things, and this offers opportunities to people who want to invest. You could invest in old toys, sports memorabilia, film props or all manner of other things. There are no limits to what people like to collect. So, do some research and find out what you would be interested in investing in. It has to be something that has long-lasting appeal to collectors. If it’s just a passing fad, then it won’t be a very good long-term investment.

ISAs

invest2If you’re looking for a kind of investment with no risks involved, then you should consider an ISA. They are a great way to boost your savings without having to risk losing your money. Of course, you won’t get rich off the back of putting your money in an ISA. But you can watch your savings steadily grow over time if you’re willing to be patient. It’s not the kind of option that will suit people who are looking for fast returns on their money. But it might still be an ideal option for you.

Stocks and Shares

The stock market is the classic investment vehicle for most people. There are pros and cons of taking up this kind of investment though. The negatives usually relate to how difficult it is to get started. When you first start buying and trading stocks and shares, you won’t know what you’re doing. You only pick up the tricks of the trade when you have been doing it for some time. But once you get the hang of it, there is a lot of money to be made by trading small amounts of stocks and shares.

National Minimum Wage

The changes to the national minimum wage, now being branded as a national living wage, will affect people in different ways. Some people will win, others will lose, and some won’t be affected at all. Read on to find out more about how people will be impacted.

Workers Over-25

The wage rise will only affect people who are over 25-years-old. So, anyone who currently earns less than £7.20 an hour will now get a pay rise because of the new legislation. For many people who work in the retail industry, this will be a big boost for them. For example, someone over the age of 25 who previously earned the minimum wage will now earn 50p more for every hour they work. This might not seem like a huge sum of money. But when it is taken into account over the course of a year, it will provide the individual with a significant wage rise. So that’s who wins, but what about everyone else?

Workers Under-25

wage1One of the major criticism levelled against this new policy is the way in which it excludes young people. With the many economic pressures and problems that young people are already facing, it might seem strange to not give them a pay raise. This is especially unfair when you consider that two people who do the same job might be paid differently purely because of their age. There are arguments for this kind of policy though. Many people hope that by not raising the minimum wage for young people, they will become more in demand. Youth unemployment is still higher than unemployment in older age groups. So, by making them cheaper to hire, it’s hoped that more young people will be hired.

Employers

Employers are going to be the ones that are paying for the wage rises that the new minimum wage will bring about. Many employer organisations and individual companies have complained about the changes. And many say that they will have to reduce their workforce to meet the new legislation. There is also the risk that they will look for ways to get around the costs involved. For example, the bosses at B&Q are in the process of imposing new contracts and cutting bonuses to offset the losses. There is a degree of hypocrisy in these complaints though. Recently Card Factory has been one of the most vocal in making clear the cuts they are having to make to meet the wage demands. But then it was revealed that their profits rose by 25% in the last year, so people’s sympathy probably won’t be forthcoming.

Self-Employed

People who work on a self-employed basis won’t be affected by the new legislation. That’s because they were never affected by the old minimum wage legislation either. There is a growing number of people who are classed as self-employed. The Citizen’s Advice Bureau has warned that 1 in 10 people who are classed as self-employed should be classed as full employees. There are tribunals involving a bike courier service that could challenge this bogus self-employment.

Average Household Bills

Nobody enjoys paying bills, but it’s something that has to be done. There are some things that most of us simply don’t want to live without, and those things have to be paid for.

Utilities

Utilities refer to all the main bills that we have to pay to keep the home warm and functioning. So, that includes the water, electricity and gas. Most households in the UK will pay between £75 and £125 per month for their utilities. If you want to save some money on these bills, then you should compare the different offers from different providers. This is now very simple thanks to all the online comparison sites.

Phone and Broadband

bills1These days, your phone and broadband bills can be combined in one package. This saves you some money, and you can even have a TV package bundled in as well. We all want to get the best internet connection speeds though, so compare the different options before coming to a decision. Paying less might not be worth it if it takes forever for your websites to load. It’s all about getting value for your money.

Council Tax

Usually, the biggest monthly repayment for a household is council tax. Every local authority in the country sets their council tax rates. The amount you pay will, therefore, depend on where you live and what kind of property you live in. They are charged in different bands. So, people living in more valuable home will mean that you are charged more in council tax by the local authority. If you want to cut your council tax, you need to move into a more model home.

Mortgage

Most people have a mortgage that they spend decades paying back. These payments will obviously vary from person to person. But the average monthly mortgage repayment for a couple who both work full time comes to about £780. That’s no small sum of money, so this will eat into your overall income at the end of the month. Also taking into account that gettting a suitable mortgage is tough to begin with, especially those with bad credit history. If you have bad credit and you need a mortgage, we maybe able to help here. It’s still often cheaper and better in the long-term than paying rent to a landlord though.

bills2Insurance

If you own your own home, then you really need to make sure that you have the right insurance to keep you covered. The building insurance will protect the actual structure of your home if anything happens to it. And then there is home contents insurance. This is different because it covers the possessions that you have in your home. All in all, most people only pay about £40 each month on home and contents insurance.

Other Costs

There are plenty of other small costs that you will also need to take into account. For example, there is the TV licence that you will need to pay for if you watch any television. Then there are the costs associated with transportation. This might involve paying for your car’s fuel and maintenance. And public transport doesn’t exactly come cheap either. Everyone has to take care of these other extra costs from month to month.

Stamp Duty Changes

For homeowners with more than one property, the rules around stamp duty have now changed. The changes came into effect on April 1st, and they will add an extra 3% to the stamp duty bills of people buying a second home. For people who don’t already have a home, then this won’t have any impact. It’s a change designed to hit those wanting to own two homes and buy-to-let landlords who have a portfolio of properties that they own.

stampduty1The idea is that the changes will level the playing field a little between buy-to-let investors and first-time buyers. That’s because the former will have to pay more than the latter. The market is becoming increasingly hostile to people who don’t have a huge budget. The problem is particularly large in London where prices are rising all the time. Recently, the average price of a home in the UK rose above £200,000 for the first-time. Therefore, it might seem illogical to make it even more expensive to buy a home. But if it succeeds in giving an advantage to first-time buyers, it will be regarded as a success.

What Exactly is Stamp Duty?

Stamp Duty Land Tax is simply the tax that you have to pay when you are buying a property. You’re not allowed to add it to your mortgage though. That means that you can’t pay it off in installments. Instead, you have to pay the stamp duty bill in one go, and this is something that has to be done within 30 days of completing the purchase of your home. Anyone who doesn’t pay this tax will be chased for the money until it’s paid. This is a tax, so failing to pay it is a criminal offence and could be classed as tax evasion.

stampduty2What Are the Changes?

The current stamp duty rates will stay the same for anyone who does not already own a home. But for people who are purchasing a second home, 3%  will be added to each of the tax bands. So, for people with no other home, buying a house worth £125,000 or less will mean that you pay 0% stamp duty. But for people who do have another home, it will be 3% for a home of the same value. This is replicated all the way up to the top band, which means that anyone buying a second home worth more than £1.5 million will now pay 15% rather than 12%.

Are There Any Exemptions?

There are some exemptions that you should know about. The main exemption affects people who inherit a property from someone when they die. If you are left a property in a will, you won’t pay the stamp duty, and you won’t have to pay it if you’re buying a plot of land next to your own. The other exemption in place relates to people who are going through divorce proceedings. Anyone who needs to buy a second home to live in while separated from a partner but before the divorce is finalised will be exempt.

Are you looking for a Buy to Let Mortgage? We can probably help you. For more information and to apply please visit out Buy to Let page here.

Buy to Let Affordability Changes

buytolet1Landlords should face tighter borrowing rules and tougher affordability tests according. That’s the verdict of the Bank of England. The bank wants to crack down on the problem of buy-to-let lending. The Prudential Regulation Authority, which regulates banks, has said that it wants to make checks stricter. This will ensure that buy-to-let investors will be able to repay their debts. And they will also have to prove that they could cope with higher interest rates if they were to rise in the future. This should weed out those landlords who can’t really afford to invest.

It’s feared that many lenders have weak underwriting standards, and that means that they pose an economic risk. If they are lending too easily to people who want to be landlords, then this could be one of the factors causing problems in the property market. If lending continues to surge though, it won’t just pose a threat to the property market. The entire financial sector could be put under pressure as well. The aim is to cut the amount of lending in the buy-to-let market by 10-20% in the next couple of years.

Lenders are also being encouraged to take higher taxes on buy-to-let investing into account too. The recent stamp duty changes will put an extra burden on landlords, which is another effort to limit the buy-to-let market. Those higher taxes could see more landlords getting into financial difficulties. And that could have a knock-on impact on the financial sector. To combat this problem, lenders are being told to look at a landlord’s financial situation in detail before lending them money. When landlords are planning for rapid growth, they take more risks. So, when the tax hikes hit them, they could be caught off guard, plunging them into debts and financial losses.

The proposals to tighten borrowing rules and affordability tests are still only proposals though. The PRA has made its position clear, and now the proposals have been put out for consultation. Recently there was a big rise in buy-to-let purchases. This came about as landlords tried to buy properties before the stamp duty rises came into effect. It’s hoped that making it harder for people to borrow money to fund their buy-to-let investments will prevent a property bubble. The rises in stamp duty for people buying a second home aims to do the same thing.

The PRA conducted research that showed that a quarter of lenders in the market need to improve their underwriting standards. These changes to the system will certainly be protested by landlords who feel like they have been persecuted twice in recent months. But there are some people who think that these restrictions are not going far enough. The Bank of England could have gone further by capping the loan-to-value ratio. The fact that they have not done this shows that they are trying to tackle the issue while also minimising the fallout that it might cause. How the rules translate in reality remains to be seen, but we’ll find out in the next couple of years.

Are you looking for a Buy to Let Mortgage? We can probably help you. For more information and to apply please visit out Buy to Let page here.

Costs of Having Children

It’s no secret that the cost of living goes up each year. For many people, their salaries don’t increase to keep up with the additional cost. As a result, many of us find that we have less pregnancy2disposable income to enjoy each month.

Perhaps one of the biggest expenses many of us bear aside from getting a mortgage is having children. Lots of people in the UK are keen to start a family and often have dreams of being parents to two or more kids.

The reality is some people find they can seldom afford to have more than one child. But just how bad is the problem these days? Here’s a brief insight into the average price of having a baby:

First 12 months: £11,224

Looking at the total cost of raising a child until they are a teenager, the first 12 months are the cheapest. On average, one can expect to spend up to £11,224 on their newborn right through to their first birthday.

That works out around £935 a month on average. You might think that’s a rather high amount, but there’s one cost many parents can’t avoid. Childcare is a necessity for many mothers and fathers. Parents, especially mums, often find they have to return to work earlier than they would like.

When that happens, and there’s no-one else at home to look after the baby, they must pay for childcare.

Total cost of raising a child from birth to 21

Using current figures, the average total cost of raising a baby until they reach 21 is a whopping £229k! Many people spend similar amounts of money buying a house as you can imagine!

pregnancy1From such a figure, one might assume that parents buy all kinds of luxuries for their kids. The truth is today’s families are spending less on things like hobbies and toys. But, those savings get eclipsed by the cost of childcare and education.

When both parents have to work, they have no choice but to pay for childcare. According to the Money Advice Service, the average cost of childcare per week is £115. This is for part-time care. Full-time care is almost double that price at £212 on average per week. Childcare costs from newborn to 21 years of age is £67k on average. That’s almost two-thirds the overall cost of raising a child to their 21st birthday!

Rising education costs put a burden on each family’s budget

The shocking truth doesn’t just stop at the cost of childcare. Parents must also pay for their children’s education costs too. Things like school uniforms, books and excursions don’t get paid by the government. That means parents must find the money to cover such expenses.

Many parents also pay for home tutoring. It’s a well-known fact that some schools just aren’t good at teaching tomorrow’s generation. As a result, private tuition fees bump up the cost of education per child.

And should parents decide to send their kids to private school, those costs will rise further.