Archive September 2018

Beginner’s Guide to Investing

Beginner’s Guide to Investing

It’s pointless to keep money lying in your bank accounts. If your savings goal is far away into the future, you can start investing your pounds. This allows you to earn from your investments and keep up with rising prices in the economy. Investing is a minefield so you should have a thorough understanding of the potential benefits and hidden hazards. Keep reading for the explanation of various associated topics. We cover:

  • What are investments?
  • What are returns?
  • How do fees reduce returns on your investments?
  • What are risks?
  • Which are the high-risk investment products?
  • When should you start investing?

 

What are Investments?

Investments are financial products that you buy or put money into. The aim of investing is to earn a profitable return on your money. By simply buying financial products of such a nature, you can grow your money quick and easy. There are four main groups of investment, also known as ‘asset classes’. These are:

  • Shares- buying a stake in a public or private company
  • Cash- savings you deposit into bank or building accounts
  • Property- immovable land or building, for residential or commercial use
  • Fixed interest securities (bonds)- issued by companies and government

Some investors might also opt for other lesser-known investment products like:

  • Foreign currency
  • Collectibles- art and antiques
  • Commodities- oil, coffee, corn, rubber or gold
  • Contracts for difference- betting on whether shares will gain or lose value

The assets that a person owns are grouped together into a portfolio. It’s a sound idea to invest in different asset classes to lower the risk of an under-performing portfolio. For example, if shares of a particular company go down while your land increases in value, you’ll be the gainer.

 

What are Returns?

Returns are the earnings you get from your investments. Investing, if done after careful consideration, can give out high returns on your pounds. Basically, it’s the profit you earn from financial products. They’re all a source of income from your assets even though they are understood and taxable under different heads. Here is a list of most common returns of UK citizens:

  • Dividends- payable on shares
  • Rent- from properties on lease
  • Interest- from cash deposits and bonds
  • Capital gains and losses- calculated as a difference between the purchase and sale priceguide investing

How do Fees Reduce Returns on your Investments?

If you have the time and knowledge needed to manage your investments effectively, well and good. Most people prefer to seek advice and entrust their investments in the hands of a financial advisor. This however isn’t free and the advisor will charge you for their service. These fees eat into your returns and you should check before you invest. On the basis of the financial product you’re investing in, investment management charges, administration charges and platform fees might apply.

 

What are Risks?

Nobody wants to gamble with their savings but the fact is that investing has its risks. There’s no investment product on the market that is potentially “no-risk”. Some degree of risk, either less or more, always comes when you invest. Let’s look at the risks some products possess.

  • Savings accounts– When you keep money in savings accounts of banks and building societies, they pay you interest on it. Although these are secure deposits, you risk losing value in real terms after some years. Inflation deflates buying power to a large extent. It buys fewer things for the same amount of money which is a loss of buying power. Interest rates don’t always move upwards with rising inflation.
  • Index-linked investments– Index-linked investments follow the inflation rate in the economy but are less likely to follow market interest rates. That means your earnings would also fall with a fall in inflation.
  • Stock market investments– In stock market investments, the sale value is what determines whether you’ll be a gainer or not. They beat inflation and interest rates but you might have to sell it for a low price if you’re in need of money. You could lose money if you bought it for more than you sold.

The best way to protect yourself from the risks of investment is through diversification. The idea behind it is to invest in different asset classes rather than one. This would help you spread the risk and offset losses if one asset didn’t perform as you hoped.

 

Which are the High-Risk Investment Products?

High-risk investment products give big payouts, at the same time are also considered big risks. Some high-risk investments we discuss here are…

  • Structured products:
    A structured product is a type of investment in which your returns depend upon a set of rules. It makes no difference whether shares in it lose or gain value. Some of these are designed to give a regular income, others have capital growth on offer and some offer both. E.g. guaranteed equity bonds, guaranteed capital plans, protected investment funds, guaranteed stock market bonds.
  • Venture Capital Trusts (VCTs):
    There are some companies that provide funds to new and upcoming businesses to set up and grow. They are Venture Capital Trusts (VCTs) and have special tax advantages. A professional fund manager runs the show and picks out companies that have a high success potential. However, individual perceptions and judgement can and do go wrong. Therefore, you may lose more than you invest. You can think about it if you don’t have issues locking your money in for at least a five-year period.
  • Spread betting:
    Spread betting is actually making a bet on the happening of an event. For example, placing a bet on share prices going up or down. These days, you can place bets on almost anything like reality TV, sports and politics. It’s a riskier undertaking so make sure you read and understand the terms and conditions before placing a spread bet.
  • Contracts For Difference (CFDs):
    A Contract for Difference is much the same as spread betting, only here you bet on an asset’s value rising or falling. The ‘contract’ is an agreement that exists between you and a broker. You agree to exchange the difference between the cost of an asset at the beginning of the contract and end of the contract. For instance, if you predict that an asset will increase in value and it decreases, you’ll end up paying the broker the difference.

 

When Should You Start Investing?

This is a decision every individual has to take for himself or herself. Generally speaking, the right savings for you will depend on how happy you’re with the level of risk, your current finances and future goals. If you have enough money in your cash savings account to last you for the next six months, you should consider investing some of it.

How Can You Improve Your Credit History with a Guarantor Loan?

How Can You Improve Your Credit History with a Guarantor Loan?

Your credit history gets affected due to your financial struggle. Both you and the creditor know that. Whenever you request an online loan quotation you are then reminded about credit history due to which your request is either accepted in stringent term or it is rejected. Due to rigid lending criteria since the 2008 year’s financial crash the situation would likely be a lot worse. It will basically forbid anyone having average credit history from securing a bank loan or a loan to be offered at huge rates. Hence there is a solution to this problem which is known as a guarantor loan.

A guarantor loan lets you borrow a loan at competitive rates to improve your credit history if you repay on time. To get your credit history in functioning order, you need two years of timely loan repayments. For a period from 1 to 7 years, you can borrow it in the range of £1,000 to £25,000 and this type of loan is classified as an unsecured loan.

 

There has been a rapid growth in a various range of personal loans like guarantors classified as an alternative loan option since the financial crisis of 2008. You may find that some of these companies might charge extra if guarantor loan is obtained through different loan brokers.  Similarly, you may also look for direct lenders who do not have any hidden charges. Take care that no fees will be added on if you make late payments, so always check this with your guarantor loan provider.

The cost and lack of other options are the primary reasons for peoples gearing towards bad credit guarantor loans. Thereby pledging his or her funds if you are unable to repay the amount borrowed, a guarantor will basically act as a co-signatory on the loan agreement. As long as the one is not financially associated with you, almost anyone can be your guarantor. Hence a loyal colleague, close family friend or even a close family member could be your guarantor.

 

Let’s Take a Look at More Specific Points:

  • Your guarantor must be a resident of the UK.
  • Must not be your spouse and must be in the age range of 23 to 74 years.
  • If you default then guarantor must accept and give written agreement to make repayments.
  • Must have a mortgage or be a property owner or be living with parents.
  • You must have a good credit history
  • Must provide relevant bank statements and proof of identity.
  • Also must have detached finances.

guarantor loan

Before Processing the Application

To get further clear-headed, use an online monthly loan repayment calculator. Now for the amount of time you intend to borrow funds, you must forecast your expenditures and income.

Do have a detailed conversation by sitting down with your relative or friend who is going to be your guarantor and also tell them that if you default on the loan; they will be responsible for offsetting your liabilities.

 

Working of the Process

After successfully obtaining a guarantor loan you will be required to repay in fixed monthly instalments. Your lender sends a report to the relevant credit reference agency every month after a repayment date.

The repayment status will be visible in the monthly reports. The borrower’s credit score would make a marginal improvement if payment is made successfully. But if you continue with irregular repayments, then a guarantor loan cannot save your credit history.

Depending upon the severity of your credit history, the markup would be taken. The rates of a loan are about 50% or an APR range is from 29% to 49% which means loan rates are not cheap. It is not a good thing but it will get your life out of a hole.

 

Read more:
Guide to Logbook Loans