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Planning for Pension

After working for a few decades, there comes a time when people start thinking of moving out of the workforce. Retirement is when you decide not to work any longer. A new phase in your life opens up. Now, there are no early mornings and returning from late night shifts. Life becomes relaxed and you can devote more time to your hobbies. However, retirement is a major life decision and one that should not be done in haste. It’s so much important to plan ahead regarding your finances. You should understand that the income you’re used to will reduce and accordingly save enough before you put in your papers. Here, we cover some frequently asked questions about retirement and pension in the UK.

  • When can I afford to retire?
  • How long does retirement last?
  • How much income would I need?
  • What is a retirement budget? Does it help?
  • What income will I have?
  • The State Pension
  • Salary-related pension
  • Workplace or personal pension
  • Income from other sources

 

When Can I Afford to Retire?

Really, this differs from person to person. In the past, people in the UK used to work until a specific age set by the State or employer. Today, things are changing. People usually work for as long as they want. The planning for retirement starts relatively early. You may either retire gradually or take up some part-time jobs rather than stopping work altogether. Whatever the case may be, it’s wise to have enough money saved up as your main income would no longer come in. Your retirement can span over one or two decades depending on how long you live.

 

How Long Does Retirement Last?

Retirement phase may easily last upto 30 years based on when you retire and the age at which you’ll pass away. This is a transition stage and requires you to make provisions for it. It’s seen that many underestimate how long they’ll live. As a result, they run out of money before long. If you have a secure income for the rest of your second innings years, there shouldn’t be a problem.

 

How Much Income Would I Need?

When you retire, your income and spending habits will change. That’s natural as the needs of senior citizens are little compared to that of young men and women. You might spend more time at home and on hobbies than before. You could cash in your pension to clear debts, travel the world or indulge in an expensive item. But, be mindful of how much you spend as the goal is to make income last till you till death.

pension planning

What is a Retirement Budget? Does it help?

Like a normal budget, this gives more weight to the expenses you’ll likely face and that need to be paid out of your income. The first step is to draw up a list of the costs of basic necessities like accommodation, food and bills. As you grow older, you’ll likely be spending more time at home. Healthcare costs are likely to go up as your body becomes prone to illnesses. Later, a need may arise for an extra hand around the house or perhaps a full-time helper for care. You should also keep inflation in mind and prepare accordingly.

 

What Income Will I Have?

For most UK citizens, the State Pension is a major source of income in their retirement years. Some also get money from other sources like savings and property. Make sure you have enough secure income before you decide to take the plunge. An income that is ‘secure’ is guaranteed to come monthly. Savings interest may not keep up with inflation and your property may remain vacant, so these aren’t secure incomes. Secure income includes:

  • Your State Pension
  • Promised income from your last employer’s pension scheme
  • Any other guaranteed income for the rest of your life

Remember: Most of your retirement income is taxable (including State Pension).

 

The State Pension

If you wish to work beyond the State Pension age, you can postpone cashing out your State Pension. It increases by 1% for every delay of 9 weeks and just under 5.8% for an entire year. It is inflation-proof and increases to maintain standard of living.

Salary-related pension from your last employer

A few employers offer their employees a defined benefit pension scheme (also known as career average scheme or final salary). You can take out your retirement income earlier or later but the normal age is 65. The more you defer it, the more you’re likely to get.

Workplace or personal pension

You also have the option to build up your own personal pension pot. As per new flexible rules, you can start withdrawing cash from this pot after your 55th birthday. However, if you use up money when you’re still working, you’ll have less to fall back on during retirement years. You could also use the money in this pot to buy a lifetime annuity providing a guaranteed income till you live.

Income from Other Sources

You might have income from alternative sources as well. These vary and there’s no guarantee of their receipts if any.

  • Part-time employment
  • Your own pension pot from which you can draw in small amounts or lump sums
  • Rental income or sales proceeds from property
  • Taking in a lodger or selling some of the equity in your home

 

Read more:
Beginner’s Guide to Investing

Beginner’s Guide to Investing

guide 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?

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

Guide to Logbook Loans

Guide to Logbook Loans

Looking for easy finance? Or not getting loans from high-street lenders due to adverse credit rating? If you have your own car, it’s possible for you to easily get a loan despite a bad credit score. Many people have a history of poorly-managed credit in the past. They find it very difficult to get unsecured personal loans. However, secured personal loans are easier to come by, especially if you own assets like a motorbike or car.

What Are Logbook Loans?

Logbook loans are secured loans given against a vehicle you own like a motorbike or car. It’s an excellent option for people who don’t want to go through the traditional route and waste time. Even in case of bad credit, lenders give logbook loans as there is less risk to them. They can be a quick and convenient way to get the cash you need when you need it.

Logbook Loans

How Do Logbook Loans Work?

Before you hand over your logbook, you must understand how such types of loans work. This will give you a clear idea of what you’re getting yourself into. Logbook loans provide credit if you own a vehicle and are ready to use it for getting credit. Usually, the ownership of your car passes temporarily into the hands of your lender. That’s because you’re getting money only on the value of the vehicle. You can still drive the vehicle so long as you keep to the terms of the credit agreement. You can borrow a sum upto 70% of the value of the vehicle. Depending on your financial situation and worth of the vehicle, a payday loan may allow you to borrow significantly more. So, it’s a good idea to explore various options before signing on the dotted line.

Most lenders offer interest rates starting from as low as 99%. Once you pay off the entire loan, the lender will return your logbook and the car will be yours once again. Yet, if you struggle to keep up with the repayments, the lender may sell your car to recoup their money. Every lender has different criteria and you should check how much amount of loan you qualify for based on your vehicle. Generally speaking, your car should have a resale value of at least a £1,000, free from any car finance you’ve taken (or nearing end of agreement) and be less than 10 years old.

Is There A Vehicle Check Before Getting Approval?

Logbook loans require you to prove your ownership with a logbook or V5 registration document. The lending company will take this document into their possession once you sign the credit agreement. There will be an HPI check on your vehicle to establish its value, term of vehicle finance debt and your ownership of the vehicle. Once this is done, you’ll have to give your personal details such as address, income and monthly expenditure. The lender will run a credit check to assess how much you can afford to borrow. But, you should do a self-check and not leave it to a third party to make decisions for you.

How Can I Apply For These Loans?

You can take out a logbook loan either in person, over the phone or online. Sometimes, you get approval within one or two hours. Also, you can choose how you want to receive the money- by cash, cheque or directly into your bank account.

Is It Different Everywhere in the UK?

If you are a resident of England, Wales or Northern Ireland, you’ll usually sign a Bill of Sale at the time of the agreement. This Bill authorizes the lending company to repossess your vehicle without a court order if things don’t go as expected. It also transfers temporary ownership of your vehicle. Lenders allow their customers to drive their motorbike or car if they keep making repayments on a regular basis.

In Scotland, the law works differently. If you apply for a loan here, it’ll be under a different agreement as Bill of Sale doesn’t apply. You’ll more likely get an offer for Hire Purchase Agreement that offers a higher level of consumer protection.

Okay… How Much Do Logbook Loans Cost?

Remember that these are an expensive form of credit with APRs nearing 400% or higher. In addition to this, you may also have to pay substantial loan charges. In some ways, taking out a standard personal loan may be cheaper. It’s a risky business, so be clear on what you’re doing.

What Are the Benefits of Logbook Loans?

This kind of secured loan can be beneficial as well as fraught with risk for you as a borrower. Although you get cheap lending, you also stand to lose your car if you don’t keep up with the repayments.

  • Lower Interest Rates:
    Typically, logbook loans carry lower interest rates compared to other types of loans for bad credit like payday loans. The APR (interest plus fees) is between 99% – 450%. These vary among lending companies so you should compare and choose. You can reduce your interest payments by opting for a low APR deal and clearing the loan as soon as possible.
  • Borrow Upto £50,000:
    As it’s a secured loan, you might be able to borrow upto £50,000 which is higher than any payday or personal loan you can get. The amount you can get depends on the following factors-
    The value of your car
    Your credit history
    Your income and expenses
    The maximum limit the loan provider offers
  • Longer Repayment Period:
    As compared to payday loans, you can repay logbook loans in small instalments over 12-36 months. This allows for budgeting and getting your finances in order.
  • No Early Repayment Penalty:
    Lenders won’t charge you a penalty if you decide you want to pay back the loan early. Sometimes, partial resettlement is possible so that interest on the remaining amount reduces. By all means, aim to repay logbook loans early if you can afford it.

What Are the Risks of Logbook Loans?

The risks of logbook loans are outlined below:

  • You may lose your car if you don’t repay the monthly installments.
  • The level of consumer protection is not the same as a Hire Purchase agreement.
  • You need to be the legal owner of a vehicle having a value of over £1,000 and with no debt on it.
  • Interest is much more for this secured loan than for an unsecured loan from a  mainstream lender.

Get Free Advice

We offer free loan advice if you have doubts whether a logbook loan is the one for you. Get in touch with us, if you have bad credit & need doorstep loans.

 

 

 

Doorstep Loans

doorstep loans

Are you looking for a personal loan you can get easily? Are you worried lenders will turn you down because of bad credit? We are here to put your fears at rest. We are one of the top lenders in the UK and have developed expertise in bad credit loan offerings. Increasingly sought out by people with a bad credit score, the trust factor is high due to our excellent customer service. If you’re looking for doorstep loans, keep reading further.

 

What Are Bad Credit Loans?

Whether you like it or not, every UK citizen has something called a credit file and credit score. This credit file records details of with whom and how individuals made financial credit transactions. That means any loans or credit cards you might have taken in the past all show up on your credit file. Three major credit agencies in the UK maintain credit files and make them available to lenders on request. They can then assess the credit behaviour of an applicant and decide whether they want to approve their loan application or not.

Now, it so happens that people who have poorly managed credit in the past find it tough to pass lenders’ filter test. Almost always, their applications end up in the trash bin. However, bad credit lenders like us want to simplify the tough times. We offer a variety of personal loans no credit check. So even if you suffer from bad credit, you can find a cure with us.

 

What Are Doorstep Loans?

Doorstep loans are very easy to understand. Simply put, these are loans that you can get sitting in the comfort of your own home. There is no need to visit a hundred lenders or submit many online loan applications. Doorstep loans are a kind of personal loans. Every lender has a representative in every locality. So, based on where you live, you’ll be dealing with a self-employed agent of the lender. This agent will come to your doorstep and have a one-on-one discussion to understand your financial situation. If they find everything satisfactory, you’ll get cash in hand in no time.

 

How Do Doorstep Loans Work?

If you apply for doorstep loans, you’ll make payments from the comfort of your own home. You won’t have to go somewhere or pay back your loan online. An agent will come to your doorstep and explain anything you need to know. This agent is a person appointed by the lender for your locality. You’ll finalise all the paperwork in a face-to-face interaction with the agent. They will understand your financial circumstances and give proper advice. Note that during the entire loan term, you’ll deal with this agent and not directly with the lender. This develops a sense of familiarity. Every week or month, the agent will come to your house and collect loan repayments.

Doorstep loans are cash loans. They are finalized within a short period and interest rates remain the same throughout the loan period. This helps in budgeting as you can work out ahead of time how much you can afford to pay back weekly. You don’t need to make any lump sum payments.

The agent who visits you will sanction your loan and pay you cash up front. They will also collect payments from your door. So, they are always available for discussion at a time and place convenient to you. You’re not just ‘another number’ flashing on the mobile screen for them. A few credit checks might take place, but if your lender gives bad credit loans, this shouldn’t be a serious problem.

doorstep loans

Why Should I Prefer You For Doorstep Loans?

Because we’re probably your best-go for bad credit loans. In case you want doorstep loans without a credit check, it’s possible with us. Making ends meet when unexpected costs crop up can be quite challenging. Our customer service puts the limelight on convenience as a friendly, local agent will discuss your loan options in your home itself. Our agents are qualified to deliver customized deals for every individual’s requirements. We won’t charge any additional fees or hidden charges. Even if your circumstances change, you’ll pay only what you borrowed. Moreover, we are an FCA-authorised lender and advise you to beware of loan sharks.

 

What Are The Pros of Doorstep Loans?

Doorstep loans have more pros than cons. Some of its pros are:

  • Instant Decision:
    When the agent visits you at home for the first time, they will go through your application and give instant approval. So you don’t have to wait to get the money.
  • No Need for Bank Account:
    Don’t have a bank account? No problem. As you both borrow and pay doorstep loans in cash, there is little need for a current bank account. You don’t need to open a bank account for getting doorstep loans for bad credit.
  • Personal Service:
    These loans offer personal services as you deal with just one agent. You can fix up a meeting in the comfort of your home. You’ll also deal with that agent throughout the entire process. This creates familiarity and understanding between both parties.
  • No Record on Credit File:
    Remember that whenever you take out doorstep loans, lenders won’t disclose it to credit agencies. There is no official record on your credit file that can affect your credit score. Therefore, there is less worry even if you fail to make one or two repayments. However, taking it lightly may lead to serious consequences.
  • Credit Score Doesn’t Matter:
    If you have a less-than-perfect credit rating, some lenders like us are willing to consider you for doorstep loans. Get in touch with us now.

 

What Are The Cons of Doorstep Loans?

These types of loans are not without their cons. They are:

  • High Interest Rates:
    You may find that the APR is unusually high for such types of loans. Interest rates tend to be higher than other types of lending.
  • Low Principal Amount:
    If you wish to borrow a huge sum of money, doorstep loans aren’t the right option for you. Generally, the maximum you can borrow with such a loan is £1,000.

 

Final Word

We feel doorstep loans are a last resort to solve your financial troubles. If you have bad credit and want a personal loan, you’ll be better off looking at other personal loans we offer.

 

Personal Savings Allowance Explained

As a UK citizen, there are a number of ways you can manage your money. Banks offer a variety of accounts for customers to choose from. The most popular ones are current account and savings account. A current account provides the facility of deposit and withdrawal for day-to-day use. A savings account is slightly different. It pays you a certain rate of interest on the money you save in that account. Although tax follows income everywhere, personal savings allowance can reduce your tax outgo. But first, let’s find out what’s the use of a savings account.

 

What Does A Saving Account Do?

A saving account is a kind of bank account which you use to save money. Usually, once you get your salary, it gets spent in one or the other way. It becomes very difficult to save money for future needs or emergency. With a saving account, you can inculcate the essential habit of saving. Every individual should save as this is the money you bank on in a financial crisis. This bank account pays their account holders regular interest on their savings. It’s either credited to the account at the end of 12 months or paid monthly if the customer wants. Opening a saving account is an easy way to get your money to bring in more money. You can use your savings for fun e.g. an overseas vacation or for investment purpose, e.g. deposit for a home loan, it can also help you in any sudden expenses so that you don’t have to borrow any bad credit loans.

 

What Is Personal Savings Allowance?

Now you know what a saving account is. But, you still need to get a clear picture of the types of savings accounts. For convenience’s sake, we divide a saving account into two types- Cash Isas and non-Cash Isas. Cash Isas (Individual Savings Account) allows you to earn tax-free interest. The tax rate is 0% for interest on Cash Isas saving account. However, non-Cash Isas and current accounts charge tax on interest. Here’s where the personal savings allowance comes into play. This allowance provides different maximum limits to different tax brackets. If you fall within a particular tax bracket and your interest is below the limit, it’s tax-free. The government introduced this in 2016.

 

How Does Personal Savings Allowance Work?

Let’s first get an overview of the UK tax slabs for 2018-19.

Basic Rate 20% £11,851 to £46,350
Higher Rate 40% £46,351 to £150,000
Additional Rate 45% £150,000 and above

 

Those earning an annual income between £11,851 and £46,350 have to pay 20% tax on their earnings. Those with an income in the range of £46, 351 to £150,000 have to pay 40% tax. An income exceeding £150,000 incurs 45% tax.

Basic-rate taxpayers are eligible for tax-free interest upto £1,000 whereas higher-rate taxpayers are eligible for £500 of tax-free interest. Additional-rate taxpayers have to pay tax on all their savings interest.

 

How Is Personal Savings Allowance Useful?

If your saving account is anything other than a Cash Isas, personal savings allowance is of great use. Below are a few examples to explain how it works:

For 20% Taxpayers

Scenario 1: You earn £23,000 annual income and £600 savings interest

Scenario 2: You earn £23,000 annual income and £1,200 savings interest

In the first scenario, the entire interest is tax-free as it’s below £1,000. In the second scenario, 20% tax incurs on £200.

personal savings allowance

For 40% Taxpayers

Scenario 1: You earn £90,000 annual income and £450 savings interest

Scenario 2: You earn £90,000 annual income and £600 savings interest

In the first scenario, the interest is tax-free as it’s below £500. In the second scenario, 40% tax incurs on £100.

 

Where Is Personal Savings Allowance Not Relevant?

Cash Isas saving account and some NS&I financial products like premium bonds are already tax-free. So personal savings allowance is irrelevant. They are most useful for non-Isa savings accounts and current accounts. You can take the benefit of personal savings allowance even for interest from:

  • Bonds- government or corporate
  • Peer-to-peer loans
  • Income from bond funds, open-ended investment companies and trusts

Income from investment is taxable in two different ways- as savings or dividends. Earnings from loan-based investments are taxable as interest, whereas those from company shares are taxable as dividend income. If you have a property on lease, the rent you receive will be considered as work or pension income.

 

What If My Interest Is More Than My Personal Savings Allowance?

It can always happen that your interest earning is more than the maximum personal savings allowance you’re eligible for. If so, banks and building societies automatically deduct tax through PAYE (Pay-As-You-Earn). You can also declare the extra interest on a tax self-assessment form. There are plans in the making to revolutionise the working of the current UK tax system.

 

What Should I Do If I Paid Too Much Interest?

Sometimes, even banks and building societies might make mistakes. They might calculate and wrongly deduct extra tax without considering personal savings allowance. In such cases, account holders can receive a refund from the tax authorities. All you need to do is fill in and submit the R40 form to the government. If you notice that your bank has been wrongly deducting tax on interest, you can claim a refund upto four previous years. Normally, it takes time for the tax authorities to process your claim. It’s advisable to wait till around six weeks to hear back from them.

 

What If I Have A Very Low Annual Income?

Like in most countries, tax in the UK doesn’t start from an income of £1,000 or £2,000. There are privileges and exemptions for low wage earners. Employees earning under £11,850 don’t pay any tax on their income. This is called personal income tax allowance. It’s an extra tax break in addition to personal savings allowance. It’s not bad even if you earn a small paycheck.

 

Then Are Isas Meaningless?

Some things may make you think that Cash Isa saving account is meaningless. Non-Isa bank accounts offer a higher rate of interest and there are loads of exemptions for low wage earners. Yet, Isas are beneficial if you save more or earn more yearly income. The best way to make your money plant grow into a tree is by boosting returns and reducing tax payment.

 

Read more:
Types of Business Loans?

Business Loans – Types & Pros & Cons

A business is always in need of funds. Be it for production, marketing, payroll or expansion, varying amounts of money are necessary at different stages. Owners may not want to dip into their bag of profits. Banks and other private lenders offer business loans for a business’ unique requirements. They are similar to personal loans but are taken in the name of your business. The reason is that a business is a separate entity in the eyes of law. Directors can carry out transactions in the name of their business.

Meaning of Business Loans

Business loans are a form of immediate finance that businesses can get from banks or building societies. Many times, obtaining a loan is more practical than using up your profits. With external financing, you can borrow and repay them as and when you like. The interest you pay is often only on the amount of loan you actually use. You can borrow as little as £1,000 or as much as £3 million. You can also choose your own loan term- from 1 month to 15 years. These unsecured or secured loans can help to fund fixed as well as working capital needs. Loans that are not secured are given only on your business’ credibility and creditworthiness. Secured loans, on the other hand, are easier to get as the lender takes less risk. Individuals can’t borrow long term business loans.

 

Types of Business Loans

Various funding options are available to a business at the stages of start-up, expansion and diversification. You can read more about them further.

  • Startup Loans:
    Nowadays, it’s more profitable to start your own business in the UK. Shifting from employment to business translates to more freedom. You can chart your own growth. Unlike in employment, the more efforts you take, the more profits you’re likely to earn. The government has always been in support of new businesses and young entrepreneurs. Any first-time entrepreneur(s) can obtain startup business loans at a low interest rate from the UK government. You can borrow upto £25,000 or less, as per your business needs. You also get five years’ time to pay it back with profits.
  • Working Capital Finance:
    If you’re looking for funds to buy land or an office space, working capital loans will provide little help. Because they’ve been designed to match the day-to-day cash needs of the business like wages, stationery, power and water bills, etc. You can’t buy assets with such form of business finance. Some lenders may also ask for a Personal Guarantee from the Company Directors or Owner. If the business is unable to pay back the loan, lenders have the authority to seize and auction the Directors’ personal assets.
  • Bank Loans:
    Your business can also get funds from banks or building societies in the UK. Banks and building societies lend out a lump sum in the form of business loans. You repay it over an agreed period of time along with interest. Like for working capital loans, banks ask a Directors’ guarantee for their loans.
  • Revolving Credit Facility:
    As the name suggests, a revolving credit facility means that credit is always revolving. You can borrow and return as and when you want. With such facility, you aren’t taking on a long-term debt.
  • Peer-to-Peer:
    Peer-to-peer loans are not given by any financial institutions. High-profile individuals with lots of money give out such loans. They usually look for earning returns on the money lying in their bank accounts. They may also ask a business for a personal guarantee.
  • Short Term Loans:
    Short term loans are taken for a short span of time, typically from a few days to a few months. They are mostly taken for fulfilling short term funds requirement. Accordingly, monthly interest and not annual interest applies to such business loans. This may prove costlier in the long run. So it’s best not to make it a permanent solution.
  • Asset Backed Loans:
    When a business has some assets like land, building, machinery or stock, it can use these assets to get a higher principal amount. Usually, lenders are willing to give more amount of such loans as they are secured with assets. There is a low risk of the lender losing their money even if the business defaults on its payments.
  • Invoice Finance:
    Invoice finance is a form of business loan that works with the invoices you’ve issued. An invoice is a receipt which is given to customers who buy from you on credit. Lenders give you a loan in exchange for invoices equal to the sum of the loan. When the customers make their payments, it goes directly to your lender. They’re of two main types- factoring and invoice discounting.

business loans

Pros of Business Loans

  • Conveniently Accessible:
    Most businesses maintain their profits accounts with a bank. As they become familiar with you, you’re likely to get more preference when applying for a loan with them.
  • Multiple Options:
    As we saw above, an entrepreneur can choose from various types of business loans. It doesn’t matter whether you’re a startup or an established company, there’s a loan for you.
  • No Profit Sharing:
    If you go for angel funding or venture capital, those investors and capitalists almost always ask for a share in your profits. This may leave you feeling you’re working for them rather than for yourself. With banks and private lenders, you can avoid all this fuss. They only interest themselves in interest and partial loan payment instalments.
  • Lower Rate of Interest:
    Banks and building societies charge a lower rate of interest on business loans than instruments like credit cards.
  • Tax Relief:
    When you use a part of your profits to make business loans repayments, you usually get an exemption from tax.

 

Cons of Business Loans

  • Lengthy Process:
    It may take a long time for a bank to verify details and sanction your loan. There are lots of forms to fill. You can avoid this by approaching a private lender.
  • Preference to Running Businesses:
    If you’re a startup that is still young, it’s unlikely you’ll have records to show of your worthy credit behaviour. This may make it very difficult to acquire unsecured loans.
  • A Lot of Prerequisites:
    There are a lot many prerequisites that a business should fulfil before they clear the loan approval process.
  • Risk Of Losing Assets:
    It’s not easy to search for the right assets at the right price. If you attach these assets to your loans and fail to make repayments, you stand the risk of losing it all to others.
  • Lesser Loan Amount:
    An entrepreneur may find that banks are willing to give only 70% or 80% of the money he actually needs. Thus, he or she will have to scout around to fill this gap.

Bank Accounts For Kids

bank accounts for kids

Many parents like to keep money aside for their children’s future. If children are told about money and finances from a young age, they grow up to become responsible individuals and citizens. There are many ways you can collect money for your kids and one of them is by means of a bank account. Though bank accounts for adults are a popular and hot topic, hardly anything is spoken about bank accounts for kids. Though you can go for long term personal loansIt’s always a good practice to start putting money into your children’s bank accounts for their education or wedding in the future.

 

What Are Bank Accounts?

A bank account is an arrangement with a bank of your choice. You can deposit and withdraw money to and from your account respectively. You can also set up standing orders for regular monthly payments like rent, utility bills, mortgage, etc. For saving money with them, banks also pay a certain rate of interest on your savings. This helps you to grow your savings. There are different types of bank accounts like Current account, Savings account, Post Office Card account, Basic Bank account, Joint account and Bank accounts for kids.

 

What Are Bank Accounts For Kids?

If your child is above the age of 11, you can easily open a bank account for him or her. This inculcates the habit of saving in children from an early age. When they save enough, they can buy anything they want with their debit card. Your children will learn to be independent of their finances. Basically, they are the same as adults’ current accounts but are for kids below the age of 18. They usually come with some restrictions on how to use them. There is no need for worry as they’re minors and can’t take any loans. Once you set up bank accounts for your kids, explain to them in simple language how they work and how they can invest their money. Avoid using jargon as it’ll only increase the confusion in their minds.

 

Who Can Open Bank Accounts For Kids?

Bank accounts for kids are meant for individuals who are at least 11 years of age. Some banks may have a higher age limit like 16 years. Till 18, they’re eligible to open bank accounts as children. After this age threshold, the bank account will be upgraded to an adult’s current account. You, as a parent, can help your children in getting their own bank account. Banks let children make financial decisions and run their account themselves. The parent or guardian can help pay money into their account and give them financial advice when necessary.

 

What Are The Features of Bank Accounts For Kids?

Each children’s bank account comes with different features but some of the common ones are:

  • Receive Money:
    If your child turned 16 last month, it’s likely that he or she will be doing some kind of job. Once someone reaches 16, employers need to pay them by PAYE as per UK child employment laws and regulations. You may also deposit some deposit into their account every month. They can receive money into bank accounts for kids by cash, cheque or bank transfer.
  • Make Payments:
    When you open a bank account for your children, they’ll get a debit card or cash card which they can use to make payments. With this card, they can make purchases in shops, withdraw money from cash machines and also shop online. If your kid is under 16, the bank will ask your permission before issuing a debit card for the account.
  • Net Banking:
    Your child is also eligible to carry out transactions between accounts with the help of Internet and Netbanking. They can check their current account balance, move money from one account to another or send someone money.
  • Direct debit:
    Direct debits are also known as standing orders. These are monthly payments that your bank to make on your behalf. Bank accounts for kids offer this special feature of requesting a direct debit for some regular expense like a monthly phone bill.

bank accounts for kids

How Can They Manage Their Bank Accounts?

We give some basic ways that will help your children manage their own bank accounts.

How To Check Balance:

  • Sign in to Mobile or Internet Banking
  • Set up text alerts for change in balance
  • Check your statement by post or online
  • Visit the bank branch
  • Phone your bank
  • Check it at a cash machine

 

How To Use Mobile Banking Services:

  • Pay a person or company
  • Check your balance
  • Move money between your accounts
  • Set up standing orders, change or cancel them
  • Report a missing debit card
  • Send a secure message to your bank

 

How To Withdraw Cash From an ATM:

  • Insert your card into the ATM machine
  • Enter your PIN
  • Check your balance if you’re not sure how much is there
  • Choose the amount of cash you need
  • Collect your card and cash from the machine

 

Where Can I Apply For Bank Accounts For Kids?

Almost all banks offer bank accounts for kids. There are some things you need to check before choosing an account. Choose a bank which has its branch and ATM in your locality, and provides a debit card and Internet banking facility. You also need to check the age limit as in some banks, children are only eligible after 16. You should also find out what the minimum balance and tell your children that they must always have that much money in their current account. Check for any special privileges like:

  • Interest on your balance
  • Rewards you get when you spend e.g. cashback
  • Freebies like discounts on driving courses

 

How Do I Apply?

You can open bank accounts for kids online with little effort. It gets done in a matter of minutes. You may need to visit the branch along with your child to provide identification documents.

 

What Documents Do I Need?

Banks usually ask for two documents to establish your identity when you open an account for your child. These are:

  • Proof of Name- Passport, Birth Certificate or Driving License
  • Proof of Address- Utility bills or bank statements in parent or guardian’s name

 

Are There Any Charges To Operate The Bank Account?

It’s unlikely that your child will have to pay monthly fees or overdrafts. But crosscheck the terms and conditions. Any interest is normally paid without deducting tax.

Bank accounts for kids are an excellent way to instil financial confidence in your children and make them capable of managing their money.
 

Student Loans – Get Your Facts Right

pension

After secondary school, many students and parents alike face a dilemma. It’s every parent’s dream to send their children to a good university. But they may put it off if they can’t really afford it. Because well-known universities attract high-paying jobs, the UK government has come up with the initiative of student loans. These are loans meant only for students who want to pursue higher education.

 

What Are Student Loans?

Student loans are loans that individuals who wish to study further after primary and secondary education can take. They help students complete their studies and bag enviable jobs. A student need not worry about tuition fees, paying for books, stationery and living. The money takes care of it all. While it was introduced by the government for the first time, some private lenders are also coming up with cheap loans for those willing to go to university. Students start repaying only after they get a job, though interest starts right after the sanction of the loan. There are additional privileges for disabled and low-income persons.

 

Student Loans Myth busters

It’s important to bust myths and misunderstandings doing the round. For this, you’ve to get your facts right. Else, a golden opportunity may just pass you by.

  • Cost and Price Are Two Separate Things:
    With student loans being as high as £50,000, many students and parents are very doubtful whether they’ll be able to repay it after all. Add to that, headlines screaming “Living loans got bigger in 2017”, the risk factor got a massive boost. But, this fear is totally unnecessary. The price tag of the university is irrelevant in the case of student loans. What matters is how much you have to repay. Those who earn a lot repay a lot while those who manage only a less-paying job pay nothing or little in repayments.
  • No Cash Isn’t Equal to No University:
    You can go to university even if you don’t have cash in hand. Once you apply for a student loan, most lenders will directly pay the tuition fees. You’ll probably need a loan for living costs too if you aren’t living with family. Full-time students start repaying only in April (after they graduate), irrespective of what the course duration was.
  • You Repay Only If You Earn Above £25,000 Per Annum:
    Student loans work on the principle of ‘pay when you earn’. According to the government, those who earn more made the most of university. The less you earn, the less beneficial university was for you. Keeping this in mind, people who earn less than £2,083 (£25,000/12) a month pay nothing at all. If you exceed this income threshold, you’ll have to pay 9% of the excess. For example, if you make £30,000, it’s £5,000 above the minimum limit, so you’ll pay £450.
  • Freedom From Debt On Repayment Or After 30 Years:
    One of the facts of student loans is that you stop making repayments when either you clear the loan or after a period of 30 years from the April following your graduation. Whichever of these comes first. And if you never got a job with an annual income above £25,000, you won’t have repaid a single pound towards your student debt.
  • Away From the Debt Collectors’ Chase:
    Once you start earning, your repayment for student loans will be automatically deducted through the payroll like income tax. That means the salary you get in your bank account will be after deducting this monthly amount. You don’t need to have tension about debt collectors chasing after your life for the money. It also means that you have little choice in the matter and can’t escape the repayments.
  • Interest ‘Above Inflation’:
    There have been some major changes for students who joined any university in 2012 and later. Earlier, there was no ‘real’ cost to borrow money via student loans as interest rate was set at RPI (rate of inflation). Now a student has to pay interest as follows:

student loans

During the course:
RPI inflation plus 3% on outstanding balance which continues upto the first April after graduation

Earning £25,000 per annum:
RPI inflation accrues

Earning between £25,000 and £45,000 per annum:
Rise from RPI inflation to RPI plus 3% with an increase in earnings

Earning above £45,000 per annum:
RPI inflation plus 3%

This is the case for positive inflation (rising prices and standard of living). It doesn’t apply for deflation (falling prices).

  • Accessible to Part-Time and Post-Graduate Students:
    Student loans are not only accessible to full-time students but also to part-timers and post-grads. Part-timers are those who study for a few hours in the day and work at night. Or vice versa. Almost 40% of all undergraduate students are part-timers, thus lenders are offering loans to them as well. Post-grads are those who want to apply for a Master’s or Doctoral degree can get loans easily. They only need to repay if they start earning enough at the end of their course. Students can apply for loans upto £25,000.
  • University Branding Makes No Difference:
    If you aren’t already aware, universities charge approximately £9,000 for a full-time degree. This is only going to increase with inflation. Top universities charge the highest fees. But student loans come to your aid here. Whatever is the total cost including tuition fees, books and maintenance loan, you’ll repay a fixed amount every month depending on what you earn over and above £25,000 in a year. So much for branding! Keep in mind that the more money you borrow the more number of years you’ll be repaying it.
  • Student Loans for Living Costs:
    If your university is in another city, you’ll have to move and likely put up by yourself in the new city (in cases where hostel facility is unavailable). This is called living costs and includes food, books, travel and accommodation. You can get a loan for managing living expenses. They are credited directly to a student’s bank account in three termly installments. The amount of a maintenance loan depends on two factors- 65% guaranteed and 35% based on your parents’ income. So parents earning more are expected to fulfill this gap.

From the year 2016-17, full-time students above the age of 60 are eligible for maintenance loans. Students in the technical education field (construction, digital skills and social care) are eligible to apply from 2019-20.

  • No Record on Credit Files:
    For almost every loan like a mortgage, credit card or car loan, lenders assess your credit file for your credit history and credit score. This file contains all the information about the credit dealings you’ve had in the past and how you managed them. Student loans are not recorded on credit files, so there’s no risk of a bad credit score. Lenders will get to know that you have student finance only if you choose to tell them.

Long Term Loans Guide

long term loans

These days, many UK citizens are taking loans for various purposes. It may be to finance a new house, a new car, pay for their education or even their wedding. Most people don’t have enough money in their current account to directly pay for their purchases upfront. Hence, they prefer to take loans from lenders like banks or building societies. There are many lenders who offer short term as well as long term loans with affordable interest rates. Long term loans are a great option to invest in assets like car or property as their duration is of 20 to 25 years.

 

What Are Long Term Loans?

When you borrow money for any purpose, it is called a loan. And loans that have repayment duration of more than one year and less than 30 years are known as long term loans. This duration is specific and spread out for a larger number of years. The interest repayments are also likely to be the same over the loan term. This allows for budgeting. That means you know how much you pay in principal and interest payments every month. Not only individuals but also businesses can take these loans for their working capital assets like buying assets, inventory and equipment.

 

Can I Get a Good Deal If I Have a Good Credit Score?

Yes, there are high chances of getting a great deal if your credit score is desirable. A great deal means a high principal amount and a low interest rate. Every lender will check your credit file for your report and score. Those who have poorly managed their finances in the past usually have a poor credit score. If you belong to this category, getting long term loans for bad credit may be your one and only option.

long term loans

What Types of Long Term Loans Can I Borrow?

Banks and building societies offer various types of long term loans for different individual’s needs. So there are loans you can borrow for a home, car, higher studies, wedding, business and also home improvement. Let’s understand each of them in detail…

  • Home Loans:
    Home loans are an easy way to finance your first or second home. There may be two scenarios here- you’re currently living on rent and want to have a house of your own or you already have a house and want a second one to earn income from it. We’ve seen that mortgage (a common name for home loans) is more commonly taken out by people for a first home. The process of mortgage goes this way. You first look up properties on sale and get in touch with the seller. You finalise a property and pay an upfront deposit of 10%. Then you apply online for a mortgage for the remaining amount. Mortgages are typically given for 25 to 30 years. This gives you enough time to repay the huge debt you’ve undertaken. In most cases, home buyers borrow for 85-90% of the value of the property. This concept is Loan-to-Value (LTV). One thing to remember is that home loans are secure with your house as collateral.

 

  • Car Loans:
    After home, the second life goal for most people is owning a car. If you don’t have money to buy a car off the showroom outright, you can opt for various car finance options like Hire Purchase and Personal Contract Purchase. You can also take long term loans from one to seven years. Some loans are secured against your car while others are not. It’s always better to take an unsecured loan as you don’t run the risk of losing your car if you default on your payments.

 

  • Startup Loans:
    Entrepreneurs who wish to set up or grow their business within the UK can avail startup loans from the government. Some private lenders also lend loans to young organizations. When a business is just starting out, it may not possess the required amount of funds. Money needs to be paid for rent, salaries, power and utility, sanitation, etc. So a business can take long term loans and repay it as and when they get a foothold and profits start coming in. Startup loans are unsecured loans. A businessman doesn’t need to have any assets and doesn’t need to raise money through the issue of shares.

 

  • Student loans:
    Those UK citizens who wish to pursue higher studies and don’t have the financial means can opt for student loans. Student loans are offered by the government and enable access to top universities which otherwise wouldn’t be possible. Typically, they are long term loans that help to pay college and tuition fees. Disabled students and parents are eligible for some extra money over and above the regular amount. A student doesn’t need to worry about repaying the loan while studying. He or she has to pay it only once they get a job and start earning. That too, how much they’ll pay depends on how much they earn and not how much they owe.

 

  • Wedding Loans:
    Even if both partners are working, it can be difficult to save enough money for a grand wedding. In contrast to old belief, a lender can help you celebrate this one of many happy occasions without worrying about the cost. Most weddings can cost upto £25,000 so you can borrow if you’re short on money. You can pay back the long term loan over a period of five years and request a payment holiday for a few months following your wedding.

 

Can I Get A Long Term From You?

Yes, we offer long term loans specially designed for people with a bad credit score. We understand how tough it is to find a lender in such cases. Your application is either refused or you get an unfavourable deal. We eliminate both these issues and also a credit check. Thus, you can approach us anytime and our team of advisors will get back to you with a tailor-made deal.

 

What Benefits Can I Get From Long Term Loans?

Long term loans have quite a few benefits.

  • Higher Borrowing Limit:
    With a long term loan, you can borrow a huge amount of funds, as high as £300,000. Coupled with flexible repayment options and a fixed time limit, these loans are useful to give your home a makeover, manage your wedding expenses and more.
  • Lower Interest Rates:
    The interest rate and APR remain low due to the longer term of the loan. Interest rate and other fees combine to form the Annual Percentage Rate (APR). The APR is different for each individual or business depending on collateral used, guarantor or no guarantor loan, credit score of the borrower and time span of the loan. Also, interest rate is fixed during the tenure of the loan.
  • Rebuild Your Credit Score:
    If you take out long term loans and repay it monthly on time, it shows good credit behaviour. Lenders send your repayment report to UK’s credit agencies every month. This helps rebuild a positive credit score.
  • Flexible Terms:
    If you can afford to pay more in every monthly instalment, you can choose a shorter term, say for 10 years. But if you want to save money and reduce your monthly outgoings, you can spread out the cost over more years.
  • Fast Loan Approval:
    No more going to a lender to submit your loan application! Everything can be done online. You can get a fast loan approval within 2 to 5 days.

 

What Risks Am I Taking With Long Term Loans?

The potential risks with long term loans are:

  • Collateral as Security:
    Long term loans need you to pledge your asset to get the loan. This acts as a safety net in case you default on your payments. If it’s 3 months since you made your loan repayment, the lender can declare you defaulter and sell your home or car to recover his money.
  • Guarantor Required:
    A guarantor is a person who assures that they will repay your loan if you are unable to. This may be a relative or close friend. Many traditional lenders refuse to give no guarantor loans.
  • Long Term Commitment:
    Any form of debt gives repayment stress and depression. You may lose your job and along with that your source of income. Ensure to have a back-up plan in place to pay your long term loan.
  • More Interest:
    It’s all well to opt for a 5-year loan instead of a 3-year one. But, you’ll pay more interest for a longer term loan. So choose wisely.

 

Read more:
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