Category: Tips

Don´t cancel your credit cards – What?

It may seem funny since my blog is all about saving money and being a cheapskate, but I am encouraging everyone to never close a credit card because it will COST YOU MONEY.

Used correctly credit cards can be a great way to save (and even make) money. This is counter to what many Debt Elimination programs preach. Indeed Ramsey says “There is NO positive side to credit card use. ” I like both Dave and John’s programs and follow much of their advice, but on this point I strongly disagree, credit cards just need to be used responsibly.

I will break down 3 main reasons not to cancel your credit card.

1 – It will hurt your credit rating.
2 – Its an interest free loan.
3 – Rewards.

1 – A large component of your credit rating is credit utilization. That is the percentage of credit you are actually using. If you call and have a credit card canceled you are reducing your amount of available credit so you utilization will go up and your credit rating will go down.

For example, lets say you had two credit cards with a $5000 credit limit and they were both maxed out, this would but your credit utilization at 100% and would greatly reduce your credit rating. Now lets say through saving and scrimping you were able to get one of them paid off. Great your credit utilization has gone down to 50% this will be a nice boost to your credit rating. But you decide to follow the advice of the Dave Ramseys of the world and cancel the paid off card, what happens? Your credit utilization goes back to 100% and your credit rating drops back down.

cancel credit cards

Another component of your credit rating is the length of time you have had credit. If that credit card you just canceled was a very old line of credit you could be in for a double whammy hit on your credit rating.

2 – Where else can you get a short term loan for no interest than a credit card? Just make sure you pay off the full balance of your credit card every month on the due date and its a free loan. I do put everything I can on my credit card. If I am going to buy $30 in groceries today, by putting it on my Discover Card® , I wont actually have to pay for 1 – 2 months (depending on my billing cycle). That is $30 I can have in my Bank of Internet Checking Account earning interest. Obviously keeping $30 for an extra month or two will not make you rich, but if you do this with all your spending all the time, it will add up. (more…)

How to Simplify Your Debt Crisis by the Process of Debt Consolidation

Assuming you took advantage of a student loan, you could already be in debt the minute that you graduate from college. Those student loans are the beginning of your credit history building and unless you are extremely careful, you might end up with more credit than you can actually afford to pay once you land a job. But whether or not you are fresh out of college, there are instances when wrong financial decisions lead to disasters.

If you find yourself dealing with mounting debt, it takes a bit of analysing your situation and knowing which solution applies to your particular case. One type of solution that you can go for is to seek help with debt consolidation. Read on to find out more about how it works, what to look for in a debt company and how you can use it to hopefully put an end to your money woes.

Help with Debt Consolidation – What Is It?

First, when you seek help with debt consolidation, what kind of assistance is it that you are looking for? As the name implies, the process of consolidation is a type of financial solution for those who are in debt. Let us say that you have three credit cards and you are unable to pay at least the minimum amount on all of them. If this is the case, getting help with debt consolidation means that you will hire the services of a professional debt management company.

Debt Consolidation

Getting help with debt consolidation is bound to lower the monthly payments as well as the interest rates once the three debts that you owe from three credit card companies have been negotiated with. One thing you need to watch out for is that the longer the debt stays, the more that you are paying your lender, so make sure that it really is an ideal debt solution for you before going for it. It’s worth pointing out that, a failure to sensibly manage your debt crisis could lead to a number of more challenging scenarios, or force you into bankruptcy. Mike Smith, of leading insolvency firm Company Debt comments: ‘The failure to adequately manage debts is a serious situation which ultimately forces creditors to take action with regards to recouping their debts. So as a holistic strategy for managing your financial situation, debt consolidation can certainly help simplify a repayment structure with an eye to keeping on top of things.

A Closer Look At How Debt Consolidation Works

Now, let us take a deeper look at how debt consolidation works. Although you do have the option of taking out a second mortgage or taking advantage of credit card offers, what is usually the best way to consolidate your loans is through the help of a bank or a finance company. Here is a quick list of what the bank or finance company can do for you: (more…)

5 Tips for Throwing a Party on a Budget

1. Invite people to bring their own

This could be the common practice of asking friends to bring ‘what you like to drink’ but you can add a really nice vibe to the affair by asking people to create something special and bring it along e.g. bake a cake to be judged alongside everyone else’s in the style of X Factor, or ‘everyone has at least one dish they’re a master of making, cook your speciality and bring it along and it will be swapped with another random party-goer – like a Secret Santa for dinner!’

2. Bulk out a buffet with cheap carbs that everyone loves

Whether it’s roast potatoes, rice, bruschetta, pasta or toasted pitta fingers everyone loves bulky carbs (unless they’re gluten-free or strict dieters) and these are by far the cheapest ingredients to buy and often the easiest to prepare.

3. Take time to prepare

As with your own food, a little time up front can save lots of money on pre-prepared food and will certainly result in tastier, healthier food. Don’t waste money on pre-cut vegetables, boil in the bag rice or pre-made mashed potatoes. Not only will people know (if they eat fresh food at home they definitely will!) but you’ll feel much better about your nibbles knowing you hand-crafted them.

4. Entertain with food-making

Have a themed night e.g. Mexican, and set out a table to create your own burritos. This requires rice, salsa, guacamole, black beans and chicken with a vegetarian alternative e.g. roast veg or Quorn pieces. You can ask people to bring Mexican drinks (tequila, beer, lemonade etc) to keep the costs low. This can work with many cuisines including Italian pizza, Chinese stir-fry or English sandwiches. Let your imagination run wild and create a memorable party!!

5. Plan with a budget

The first thing you have to do before you start is decide what you can afford to spend. Sounds obvious but many people neglect this crucial step and end up overspending. Once you know what you can afford you can work out the cost per person based on how many people are coming. The next step is to deduct the fixed, non-food costs as these are easier to calculate i.e balloons, disposable cutlery/crockery (only if you need it as it’s an expensive luxury!) and drinks. Whatever you have left will dictate the food you’ll be offering guests. As we said above, if you’re left with very little cash, cheap foods like potatoes, rice and pasta are often the most popular. Vegetables and meat are often cheaper if they’re in season and can be much cheaper from local stores.

Once you’ve settled the financial side of your party planning, the important thing is to have fun and rest easy knowing that the financial stress has been taken out by a little planning in advance.

Making Money in the Recession

While a country is in recession it can be difficult to imagine that it is possible to make more money than you are. You may think that there is just not the opportunity out there. It is true, that it will be tough to do so, but it is possible still. There are a series of things you can try, listed below.

–        Ask for a pay rise – it is possible to ask for a pay rise but you may be worried that this is just not possible. However, as long as you have not asked too recently, it is worth checking. Your manager can only say ‘no’ in the worst instance. You will not be punished for it and there is always the chance that they may say yes.

Recession

–        Work more hours – It is possible that you may be able to get more work at your current job in order to bring in more money. It is worth asking whether this is possible, perhaps to get some overtime or to increase your part-time hours. This may not be available immediately, but showing an interest could help you if the opportunity does arise and so it is always worth making your manager aware that you are happy to do this.

–        Get a second job – working extra hours may be something that some people cannot do. This might be because of child care issues, for example. However, it is worth considering whether you do have the time to fit in some extra time for work. You will need to let your current employer know that you are working two jobs and get in touch with the tax office so that they put you on the right tax code as a second job may be taxed too highly otherwise. Even a few evenings a week or a weekend day, could really help to bring in more money.

–        Work for yourself – this is something that you are wise to do in your spare time if you already have a job, but could be something you could full-time if you do not have a job. There are a lot of opportunities out there for self-employment. You will need to tell your employer and the tax office though. You could deliver catalogues and get commission on sales, you could do freelance work from home or buy and sell things to make money. With the Internet, there are many opportunities to work for yourself and they do not have to cost very much money.

–        Sell things  – you could sell unwanted items to raise some extra cash. You could do this online through an auction website, for example or use classifieds, or a car boot sale. There are many ways that you can sell and you do not have to declare this income to the tax office, if the things that you are selling were yours originally.

–        Voluntary Work – obviously voluntary work does not pay, but sometime sit can lead to paid work. It is also useful because it will give you something to put on your CV so that future employers can not only see that you have been learning new skills, but that you have not just been wasting time while not in paid employment.

Should You Save Your Money Or Pay Off Your Debt?

If you’re lucky enough to have money left over at the end of the month or if you get a bonus through from work, what should you do with the extra money?  Of course, many people will be tempted to spend it on nice things like clothes or gadgets, but realistically the two best options for that money would be to either use it to pay off some of your debt or put it away as savings.

What would be the best option?

Saving Money

One of the biggest arguments for saving your money is that you are covered should a financial emergency pop up. Also, by doing this, you could try to prevent getting into debt in the future. However, the difficulty with doing this and not paying off your debt, is that the interest on things like credit cards will increase, leaving you paying off more money that you might have done before.

Paying Off Your Debt

Paying off your debts is important as the longer you leave it, the more interest you will pay, so it’s a good idea to get rid of the debts as quickly as possible.

However, if you decide to use the money to pay off your debt, you could leave yourself at risk if a financial emergency appears. If an unexpected expense does pop up, then you might find yourself relying on credit cards to cover the costs, which could make the debt worse.

Pay Off Your Debt

Why Not Try Both?

I think realistically, it’s important to do both. It’s a good idea to be able to find a good balance between paying off your debts, but trying to set some aside in case of emergencies. So, maybe if for example, you were lucky enough to be given a £500 bonus at work, then it might be worth putting £250 into a savings account

Obviously, this does depend on your circumstances, as most people aren’t lucky enough to have money left over at the end of the month. If your debts are more urgent, like a utility bill and you don’t have any spare case and don’t want to use credit cards, what are your options?

If you have no emergency fund and an unexpected finance does come up, then you might consider a short term loan like a payday loan. It’s possible to apply for anything from as little as £50 to as much as £1250, which you borrow until your next payday.

5 Ways You Can Manage Money Better

Managing your money doesn’t have to be a complicated process. In fact, it’s better to simplify money management so that you can keep your financial situation as organised and understandable as possible.

Usually, the biggest complications arise from neglecting to do a few small things. Though these may be small, forgetting to do them can make it easy for your finances to get into a jumble. Below are 5 ways you can simplify your money management and keep your spending under control:

  1. Track Your Spending

Begin by keeping a daily record of everything that you spend. Once you do that, you will be able to see exactly what you are spending your money on and build your budget from there. While formulating a budget sound time-consuming and complicated, it becomes easier if you do it regularly, plus it saves you a lot of time and money in the end.

manage-money

  1. Start a “Bill Calendar”

If you have trouble paying your bills on time, make a “bill calendar,” which shows when each recurring bill is due. You can make this calendar on your computer, mobile, or in a notebook, just be sure to review it once a week and pay any bills that are due.

  1. Have an Emergency Fund

Everyone is at risk for accidents and the occasional emergency, and it is best to be prepared before it happens. People who are unprepared tend to use their line of credit for emergencies, and end up going into debt. If you have money set aside for accident and emergencies, you won’t have to worry about how to manage during your time of crisis. You’ll be ready to take care of what you need and you won’t have to spend months or years paying it off.

  1. Use a Prepaid Card

Using a Prepaid card helps you stick to your monthly budget. Each month, simply load the budgeted amount of fund into your prepaid card account. Prepaid cards are not connected to a line of credit, which means you will not be able to spend more money than you have pre-loaded on the card. This keeps you from overspending beyond your set budget, while still be able to enjoy the convenience of using a card as a payment method. Prepaid cards can be used anywhere traditional credit and debit cards are accepted, including online, in-store, and also to withdraw cash at ATM machines. (more…)

Are You Ignoring the Power of an ISA – Here’s Why You Should Get in the Action Now

An ISA account isn’t very glamorous, but it is reliable. In an era where people are trying out a lot of different alternatives to make a little more profit on their money, there is a growing movement that is desperate to get people to go back to the basics.

What is an ISA account? If you’re just looking into this, here’s the quick rundown that you need. Basically, this is a savings account that has tax benefits if you use it. It allows you to save money in a way that is advantageous to you tax wise. The money that you make on the ISA isn’t taxed, and the money that you put in is spared from taxes. Given that the government is basically giving you encouragement to save, you might as well do what you can right?

You can open an ISA account from age 16 and over, which gives you plenty of time to let your money grow. The Government is really serious about people doing more with the ISA, because it’s such a great way to build the future while still saving money on their taxes. Nationwide UK did some research and discovered that the Government receives an extra 500 million pounds in terms of tax revenue just because people don’t put enough into their ISA accounts. That’s definitely something that needs to change, and it has to change in a big way. It’s only going to start moving in a positive direction once people start seeing it as something that they need to do.

Power of an ISA

There is a limit that you need to respect, and it includes both parts of the allowance for the ISA. There’s a cash ISA side, and a stocks and shares ISA side. Both sides come up to 11,620 GBP for the current tax year. You should always check year to year, because the allowance changes and you want to make sure that you maximize the tax benefits.

If you want to maximize your ISA, some experts say that you should focus more on the stocks and shares (S&S) side than the cash ISA side. However, you should keep in mind that you can lose your money on the stocks and shares side. You’re not guaranteed to get an increase on your money. However, you can also get a lot more than you might expect, versus the cash ISA side. Either way, you don’t have to report your ISA savings to the Government for tax purposes, as long as you follow the rules. (more…)

Loans For Bad Credit: There’s Hope For Everyone

Do you have a poor credit rating? Is your credit rating affecting your ability to get a loan?

Countless numbers of people are now unable to borrow from banks because their credit score says they can’t be trusted to make repayments and this has created a major problem for many borrowers in the UK.

For a huge period of time, the concept of borrowing money was based on your reputation; bank managers were a part of the community and personal relationships mattered. Common sense appears to have deserted the financial community, or has it?

a-bag-of-money

Turning To an Overdraft?

One of the first places people used to turn when they struggled to keep their financial head above water was their overdraft but banks will only tolerate people being stuck in an overdraft for so long.

Most banks will run reports that monitor bank accounts and will look for signs that people are struggling.

For more information regarding overdrafts please the dedicated Wikipedia page by clicking here.

Overdrafts Withdrawn

If a bank thinks you’re relying on your overdraft too much they have the ability and have been known to take the whole overdraft facility from the account.

They’ll usually time the removal of an overdraft with your payday, so the money coming in repays the overdraft but leaves you with very little to cover any additional costs.

This has led to the quest for alternative methods of obtaining new credit.

A Second Chance

It hardly seems fair for people to be penalised for a mistake for ever. Yet for anyone who has finds themselves answering yes to any of these questions below, it became crucial that something new became available offering an achievable alternative:

  • Do you have a poor credit record/history?
  • Do you have no credit history at all?
  • Have you moved address regularly?
  • Have you fallen into arrears on loans or mortgage?
  • Do you have any CCJs (County Court Judgements)?
  • Have you defaulted on previous credit cards, accounts or loans?
  • Even, are you self-employed?

Bad credit loans are designed to give people that alternative.

Banknotes

Don’t Fit The Mould?

Many people no longer fit the perfect mould that is expected by nearly all High Street lenders in order to be eligible for a standard personal loan but this is no longer the problem that it once was.

All bad credit loans obviously have their own advantages and disadvantages but they all offer options where there recently were none.

Turning To a Guarantor Loan

One of the most popular alternatives is a guarantor loan which work by offering loans specifically created for anyone with a poor credit rating.

This may sound a little unusual because lenders don’t usually seek our borrowers with poor credit ratings but the risk to the lender is balanced by using family members or friends with better ratings to act as guarantors who will pay the debt off if customer defaults.

For an explanation regarding guarantor loans and their benefits please view the video below.

What are the Pros?

The process surrounding many bad credit loans is designed to offer a swift resolution. Decisions are often made within minutes, with the balance appearing in your account shortly after the application is granted.

Depending on the lender, amounts ranging from £500 all the way to £10000 are generally available at a significantly reduced rate when compared to payday loans.

Having a guarantor makes it more likely you will be accepted for a loan where High Street lenders would reject you. Some allow you to repay early without charging you early repayment fees.

Any Cons?

Interest rates are still comparatively high when compared to standard unsecured person loans but because the majority of these are unattainable to borrowers with a bad credit rating, they are still an attractive and realistic proposition.

The main area of worry for people applying is that having a guarantor means that they can be chased for the money in the event you don’t pay your debts. This can of course be avoided by making the repayments as and when they are required.

Payday Loans

Demand for payday loans soared during the recession with consumers becoming increasingly strapped for cash. But people facing cash-flow problems must look into this type of loan for bad credit before deciding this is the right option.

Payday loans have been specifically designed to bridge the gap until payday if you find yourself short and are as such are generally short-term loans typically of up to £400 provided generally for a maximum of 30 days.

Neon-Loan-Sign

Don’t Be Reliant on Payday Loans

The high cost means such loans should only be a one-off and you should be confident you can pay it back on time. They should not be something on which you’re reliant on a monthly basis, and definitely not to service other debts.

Warning: You shouldn’t take out payday loans if you know you can’t pay them back within a month, nor use them to service other debts as this can lead to significant problems.

Borrowing For Need

Due to the interest rates associated with some bad credit loans, and in particular payday loans, they should only ever be used for emergencies rather than luxuries.

Credit Scoring Problems

It is very difficult for a consumer to know in advance whether they have a high enough credit score to be accepted for credit with a particular lender. This is due to the complexity and structure of credit scoring, which differs from one lender to another.

Lenders do not have to reveal their credit score, nor reveal the minimum credit score required for the applicant to be accepted. It is impossible for the consumer to know in advance if they will pass a lender’s credit scoring requirements.

Improving Your Credit Score

Along side actually getting hold of some extra money, the most important aspect for many people is receiving the opportunity to do something about it.

Many borrowers find themselves stuck between the proverbial rock and hard place when faced with a poor credit rating because the best way to turn things around is to demonstrate an ability to repay debt on time. Until fairly recently, this has often proven to be very difficult though due to the unwillingness of lenders to take on the risk of a borrower with a poor credit rating.

How To Do It?

If you are in a position where your credit report can’t be given the quick-fix treatment such as deleting an entry that doesn’t belong there, bad credit loans can help to turn things around.

If you continue to make the scheduled repayments, not only will successful applications for bad credit loans prove to be immediately beneficial, they will also help in the future when you make any applications you need to make for credit in the future, be they a mortgage, credit card, or loan.

Any Alternatives?

Otherwise there are various other ways to improve your rating over time but the best thing to do is to show you can handle the credit you do already have by using it carefully and making the required payments on time.

Don’t Give Up

Even when things may seem bleak, it is important to remember that there are a number of loans for bad credit out there ensuring there is hope for everyone.

If you would like a little more information regarding the ability to bring debts under control and turn your credit rating around, the UK government offers a range of hints and tips which can be accessed here.

Author Bio

Emma Farmer has been a freelance finance writer since 2005. She now works as blog writer for Guarantor Loans UK which places a strong focus on all types of bad credit loan. For more information please click here. An extreme sport fanatic who completed the London marathon for the first time in 2013, she lives in London, England with her husband and 2 children.