Lockdown

How to Keep Your Income from Dropping during Lockdown?

John

COVID-19 pandemic has affected everyone all over the world. Lockdowns were imposed in places where the deadly virus cases are rampant. As people stayed at home, business establishments lost their customers, and many eventually closed down. Millions of people lost their jobs and their livelihood. If you have been dependent on your salary alone, you will find savings dwindling without any means of reversing the situation. A severe recession especially in the UK, is coming, and everyone must find a way to keep his income from dropping during the lockdown.

Here are some ways to keep your finances on the positive side during this pandemic.

Always Monitor Your Savings

You are lucky to have some savings during this pandemic. Always check your bank balance to avoid overspending. The pandemic is not the time to buy unnecessary things or to go shopping every day, eating out in expensive restaurants, or taking a vacation in places where you can freely move around. If you keep on spending without a specific source of income, your bank account will soon be empty and you will find it a challenge to have some savings again. Always monitor what you have in the bank and avoid dipping into it unless you have an emergency.

Besides, knowing that the money that you have kept in your bank account is slowly disappearing will motivate you to find more ways to stop your income from going down during the lock down.

Request for Payment Holiday

If you have loans to pay, a lockdown during the pandemic may not be a happy time for you. With your wages cut or gone at all, there is no way that you can meet your payment schedule. However, in the UK, borrowers can ask lenders for a payment holiday. You can temporarily stop payment for up to three months with no interest to minimal. However, you must pay for the months that you missed payments.

Instead of your loan ending after six months, the lender will add three months, making it nine months for you to pay back the money that you owed in full. Payment holiday may also apply for rent, utility, and other bills. However, always talk to your landlord, the utility companies, and the lenders about your payment holiday.

Take Steps to Earn

Many companies that did not lay off workers allowed them to work from home to continue getting paid for their work. If you have the misfortune of losing your job, look for a different source of income immediately. There are thousands of positions online if you have the patience to look for one that will suit you best. People with good writing skills can take a writing job while experts in information technology and become online programmers, website designers, and website builders online. The pay is also competitive especially for experts.

People who are not comfortable working remotely can engage in online business. During the pandemic, the entrepreneurial spirit of many people soars high. Earning opportunities include baking and selling cakes online, preparing snacks and delicacies to market, offering home service for hairstyling, manicure, and pedicure. Some people engage in the direct selling of clothing, cosmetics, other beauty products, and gadgets to have a steady income source.

Check for Financial Benefits

The UK government offers financial assistance to people that lost their jobs because of the COVID-19 pandemic. The UK government has been offering financial support to self-employed individuals to help them survive during the pandemic. The government will cover part of the wages of workers whose employers have cut their salaries and provide financial assistance to establishments that are struggling to keep their businesses afloat.

Advice

When is it better to get a loan and when is a line of credit preferable?

John

Most lenders spend a large portion of their resources trying to find new products to market to their clients, however, the two main forms of debt that people access are loans (namely personal loans) and personal lines of credit or HELOCs. Both of these are extremely popular because it is easy to apply for them and there are no restrictions placed on what can be done with the money. However, the fact that they share one or two common traits does not make them equivalent. Each of them is designed to cater to different types of individuals and, as a result, they offer different advantages. This having been said, we will look at how the two compare, and also try to establish which one is better.

Loans vs Lines of Credit

Similarities

  • Both loans, as well as lines of credit, allow individuals to borrow money without restricting its use;
  • Both can have either fixed or variable interest rates;
  • Both can be refinanced or consolidated if the borrower is unable to repay the money on time;

Differences

  • When getting a loan, borrowers get all the money at the same time and have to pay interest until the end of the agreement or until they repay it. On the other hand, when getting a line of credit, the borrower gets access to a bank account that contains all the money that he can borrow. However, he only pays interest for the amount that he withdraws from that account;
  • Lines of credit are almost always secured. They require collateral that is equivalent in value to the amount of money that the borrower gains access to. Loans, however, can also be unsecured, provided that the borrower has a good credit rating;

Advantages of Loans

Loans are great for specific expenses. They are useful when the borrower knows the exact amount of money that he needs. Furthermore, the fact that they can be unsecured makes them considerably easier to get than lines of credit. It is also important to mention that loans, especially personal ones, tend to be easier to refinance and consolidate because they have lower values.

Loans are usually the recommended choice for individuals who are planning to get a new car, pay for expensive household appliances or get a new phone/laptop.

Advantages of Lines of Credit

Lines of credit offer more flexibility than loans in the sense that the borrower only pays interest for the money that he withdraws. This makes them a better option for those who cannot estimate the total cost of their expenses. These products are also great for long-term expenses, such as home renovation projects, long holidays, recurring medical treatments, and others. Some individuals have also recently started using them as a financial safety net in case their income is not enough to cover all of their monthly expenses.

When compared to loans, lines of credit give borrowers access to considerably more money, however, they imply greater risk. If a borrower is unable to repay the line of credit and is not eligible for refinancing or debt consolidation, the lender will be able to take possession of the collateral.

Which One Is Better?

Deciding which of the two is better will boil down to the needs of each borrower. Some may find that they need the flexibility offered by the line of credit, while others may simply not be eligible to get one, on account of the fact that they do not have anything to offer as collateral. It is a matter of case and preference.

Payday Loans

What Are the Best Alternatives to Payday Loans?

John

The Covid-19 pandemic has reduced the income of a large number of people, making it difficult to keep up with the monthly expenses. This has pushed many to borrow money from banks and other lenders, and the most accessible type of loan that employees can get is a payday loan. These enable individuals to borrow money in a matter of minutes and use it however they see fit. Depending on the lender, the loan usually has to be repaid in a certain amount of time (usually 30 days). From a functional perspective, payday loans can be extremely useful, however, they have two big flaws.

First of all, payday loans come with high-interest rates that may add to the financial difficulties that an individual is going through. Secondly, using them too often can wreak havoc on your credit rating because lenders will conclude that you are dependent on the loans to get through the month.

This having been said, there are great alternatives to payday loans, provided that you know where to look and how to use them. Here are the best ones that are currently available:

  1. P2P Lending Platforms

P2P lending platforms are websites that put lenders and borrowers in contact with one another. The platforms themselves only take a small commission and oversee the deals to ensure that all parties involved stick to the terms that they agreed upon. Borrowing small amounts of money through these platforms is not difficult and the loan is usually given in under one week, making it great for planned expenses such as rent or utility bills.

  • Online Lending Services

Online lending services such as Cobra, work similarly to banks, however, they do not report their activity to any of the national credit registers, which means that borrowing money from them will not affect an individual’s credit rating. The downside with them is that they have relatively high-interest rates, making them useful only in case of an emergency.

  • Lending Apps

Lending apps take borrowing money to a whole new level. Once an individual installs and registers on one of these apps, he can get micro-loans in a matter of minutes. In most cases, creating the account will only require proof of identity, proof of residence, and a bank statement in order to link the app to the user’s bank account.

  • Local Credit Unions

Local credit unions are often created in small towns or are built around large workplaces such as factories. Their services are only offered to the individuals that share a common link to the people that are part of it. For example, if a credit union is started by the employees of a large company, they may choose to only give out loans to other employees from the same workplace.

  • Lines of Credit

Most people do not think about the advantages of getting a line of credit, or a HELOC, when they are going through a period of financial instability, however, these forms of debt are much more useful and affordable than any type of loan. They give individuals access to large amounts of money, however, the borrowers only pay interest from what they withdraw from the account. This can make them great for individuals who need to pay the rent or their utility bills a few weeks before they get their salary.

Please keep in mind that using the 4 alternatives that have been included in this list will not have any effect on your credit rating. The loans will not be marked in your permanent financial files. However, not repaying them may lead to legal issues.

Payday Loans

A Look at the Main Types of Loans That an Individual Can Access

John

The ongoing Covid-19 pandemic has led to many people having their income reduced. Furthermore, a large number of individuals have even lost their jobs with no prospect for the future. Regardless of how much money an individual has set aside, there may come a time when you will need to borrow money from a bank. The good part is that banks and other private lenders are currently offering dozens of deals to choose from. This having been said, variety is usually good, but in this situation, it can be confusing. While the lenders do market their products through commercials and online ads, most do not explain what kind of deals they are offering. To make things a bit clearer, we will look at the main types of loans that an individual can access:

  1. Personal Loans

Personal loans are some of the most popular types of debt in the world. They can be secured or unsecured and enable individuals to borrow relatively large amounts of money. There are no restrictions on what the borrower can do with the money, and almost all lenders offer them. As with any type of loan, the interest rate is usually based on the borrower’s credit rating.

  • Small Business Loans

Small business loans are secured loans that are given only to small businesses that provide the lender with a well-prepared business plan. Once the plan has been reviewed, the terms and conditions are established and offered to the borrower. When it comes to these loans, it is important to keep in mind that lenders may require the lender to offer a personal guarantee as collateral for the loan. This usually happens when the company does not yet have enough properties to offer as collateral for the loan.

  • Home Equity Loans

These types of loans are always secured and require a special type of collateral, namely the borrower’s equity in his home. The value to the loan is established depending on the value of the collateral that the borrower offers and the term is similar to that of personal loans. The main advantage of Home Equity Loans over Personal Loans is that the former can be used to borrow considerably larger amounts of money. They are great for large expenses such as purchasing a new car or paying for an expensive medical procedure.

  • Lines of Credit

Lines of credit are different from loans, but similar to credit cards. When a borrower applies for a line of credit, he will be given access to a bank account that will contain a set amount of money. He has access to the whole amount, however, he only pays interest for the amount that he uses. Lines of credit are usually great for home renovation projects or other situations where the final cost of a product or service cannot be established.

  • Home Equity Lines of Credit, or HELOCs

HELOCs are lines of credit that use the borrower’s home equity as collateral. They have low-interest rates, long terms, and very high values.

  • Payday Loans

Payday loans come in a wide variety of shapes and sizes. Almost every lender offers this type of loan but markets it under a different name. These are micro-loans that allow individuals to borrow relatively small amounts of money for a period of up to 30 days. Getting a payday loan often takes under 60 minutes (some lenders offer them through cashpoints), however, they have high-interest rates.

These are the main types of bank-related loans that individuals have access to. While many online-based services enable people to borrow money, they operate in a grey area and the transactions are not reported to credit registers. This means that getting a loan from them will not help build up your credit rating. Young adults and individuals who do not yet have a good credit financial history are advised to borrow money from banks rather than from other sources. This will enable them to build up their credit score and have a good relationship with lenders.

Personal Loans

5 Tips to Get Better Terms on a Personal Loan

John

Personal loans are currently the most popular way to borrow money. This is partially a result of how easy most lenders have made it to get one, but it is also because money borrowed through personal loans can be spent on anything that the borrowers want. There are no restrictions attached to the debt. Furthermore, for the most part, individuals do not need to have a perfect credit rating to get a loan. This having been said, one’s financial records do still play a big part in the terms and conditions that the lender will offer. Everything from the term of the loan to how much money can be borrowed and the interest rate is decided by looking at an individual’s credit rating. In other words, it is important to do a bit of financial housekeeping before applying for a personal loan, to ensure that you will get the best deal possible.

While it may not occur to some, the small financial decisions that individuals take when it comes to their purchasing habits can play a bit part in their credit rating. Anything from the number of credit cards that an individual owns to how often he uses them may increase or lower his credit rating. Here is what you need to do to get lower interest rates and borrow larger amounts of money through personal loans:

  1. Use Credit Cards Sparingly

When lenders look at an applicant’s credit rating, they primarily look at his financial habits. The most important of these is how he manages his finances. Using credit cards too often usually signal lenders that an individual is dependent on the additional credit and that it might be difficult for him to repay a larger personal loan. As a result, they may offer a smaller deal or one that requires collateral.

Try, by any means possible, to use your credit cards as little as possible. While using them every 5-6 months to pay for a bigger purchase will not be an issue, treating them like running capital is not a good idea. Furthermore, always make sure that you keep your credit utilisation ratio under 30%.

  • Only Keep One or Two Credit Cards

Most individuals have two or more credit cards, “just in case they come in handy”. However, having access to a lot of credit, even an unused one, will still lower your credit rating. Chose one credit card, preferably the one that has the best terms and conditions, and close the others.

  • Repay Some of Your Smaller Loans

Lenders offer better terms to individuals who do not have a lot of debt. This means that paying off your smaller loans can have a big impact on the interest rate of the personal loan that you apply for. Start by paying off your credit cards, these should be the easiest to do. Next, take care of payday loans, and finally, any personal loans that you can repay early.

  • Borrow Money Using Unreported Means

Borrowing money too often will also lower your credit rating, regardless of the amount that you’re getting. Avoid borrowing money, at least 6 months before applying for the loan. If this is not possible, consider using other means to borrow money, such as online lending services or P2P lending platforms.

  • Do Not Miss Bank Payments

Lastly, never miss your bank repayments. Skipping or delaying one of these payments may seriously damage your relationship with the bank and cause the lenders to be more careful with future loans.

These are the 5 things that can take an individual’s credit rating to the point where he may get lower interest rates and higher value loans from banks, as well as other private lenders. However, the utility of these habits goes far beyond getting a personal loan. As time passes, they will help you slowly increase your credit rating up to the point where getting any type of loan will not be an issue.