Filthy Lucre

Here are a few tips on how _not_ to get a loan, and underneath each one, the smart thing to do instead.

1. Ignore borrowing costs.

Examples of these are insurance schemes and prepayment penalties. Make sure you understand and are willing to pay them all. Understand your agreement before you sign, including terms and conditions.

A loan may become too expensive, with variable interest rates and fees. The total cost of your loan will depend on the annualised percentage rate (APR). The annualised percentage rate takes into account the interest amount, and all other charges.

2. Pick the first lender you think of.

Deals vary enormously, from loansharks to credit unions. Consider fully mutual building societies and credit unions, then find companies that are dedicated to loans. The first were set up to help members, and the latter’s earnings come exclusively from lending money. They can offer better deals.

3. Communicate by telephone only, and don’t record the name of who you spoke to.

Make sure you get the full name of the person with whom you speak, if you call your loan company. Big offices are impersonal; your loan officer could leave at any time. Write letters to keep a record of important points.

4. Take on a loan thinking “Well, I can always go bankrupt”.

This is stupid. You would find it very hard to get credit of any kind in the future, when you need it badly.

5. Avoid researching the lender.

Type the name of the lender into a search engine. See if there are any negative postings about them.

6. Who cares what it’ll cost you!

Think about your budget; how much can you afford each month? Then leave a portion of your monthly income aside as coverage for emergencies and unexpected bills.

7. Take your time paying it off.

No matter how cheap a loan may be, pay it off as quickly as you can to avoid interest accumulating. Try to get a loan that allows early payments; the quicker you pay back, the less interest you pay. If you extend the duration of the loan, you will have to pay much more in interest.

8. Make lots of enquiries in a short space of time.

Any more than four credit checks in one month for a personal loan looks suspect, and may affect your credit rating. When shopping for a quote, ask them if they’re going to check your credit-rating, to be on the safe side. They don’t need to, to give you a rough estimate.

9. Have lots of credit available to you, then ask for more.

To ensure you get the best terms, keep your credit-line as small as possible. Loan officers tend to count the total line of credit available as a liability.

10. Default or make late payments on small debts.

Not paying off that hire-purchase agreement years ago will come back to haunt you. Pay off small debts before they’re due. Cancel credit cards you are not using. IMPORTANT: Keep your oldest card, for the credit history attached to it. Otherwise, consider their interest rates and fees, when deciding which ones to hold on to.

11. Sign papers without reading them.

You’re anxious. You want the money _now_. Cue major upset later when you realise what’s in the small print.

12. Keep quiet about repayment problems.

If you have problems with repayment, write to your lender as soon as possible. The earlier you tell them, the more sympathetic they’ll be. You can then make arrangements for under-repayments until you get back on your feet.

T. O’ Donnell is a credit broker offering personal loans (UK), secured loans (UK) and mortgages (UK) in the city of London.

HERE’S A BIG TIP: ALWAYS HAGGLE. The first quote you’re offered is not the bottom line. It’s easier to get a better deal from one lender if you’ve been offered a good one by another. You can use this as ammunition.

You’ll likely be dealing with a call centre or a junior loan officer initially. You can say you’re definitely interested, but want a better deal, close the conversation, hang up, then wait for them to get back to you.

Buy in November or December if you can; you can see how the house performs in winter. This is usually a slow time in the property market, so you may be able to wangle a ’seasonal discount’.

Don’t look for a property without being pre-approved for your first mortgage. You will have much more negotiating power with the seller, and may be able to save thousands.

You need to be sure you can afford the repayments. Lenders consider a number of things working out how much you can borrow, like your outgoings and credit history, your income, employment status and the property value. While lenders use different rules, most share these guidelines.

A fixed rate mortgage seems a good idea on the face of it, but they often come with higher penalty costs. If there’s a good chance you’ll repay the loan before the end of the term, perhaps a variable rate, with lower redemption penalties, would be better.

You may find a lot of companies offering very low initial rates, but hiding high additional costs in the small print. Ask them to explain all additional costs, rates and payment conditions. Don’t just read the small print yourself.

Regarding the property, don’t take the vendor’s word that repairs have been made. If the vendor agrees to make repairs, have your inspector verify the work’s been done before closing. Ditto for any other claims made by the seller; verify them independently.

If you have doubts about a particular lender or seller, or if you have a feeling that they’re being cagey with you, just walk away and continue looking for better deal elsewhere. There’s no need to become enchanted by the house-buying process; in the end it’s just another material good, and you can’t take it with you!

And lastly: Try to keep the duration of the loan as short as you can. The shorter the term the less you pay in interest. You may think the mortgage is affordable now, but what if you get into financial difficulties in ten years’ time? Find a mortgage that has low or no pre-payment penalties, and pay it off as quickly as you can. You’ll sleep easier, and your bank balance will look a lot sweeter.
T. O Donnell <a href=”http://www.ttmortgages.co.uk/mortgage-providers.shtml”>(Mortgages UK)</a> is a licenced credit broker based in London, UK.

Living on credit is fashionable. Indulging oneself is fashionable. Saving money isn’t.

This is a pity, as it has much to recommend it. You have more peace in your life. The end on the month is simply a date on the calendar, rather than a countdown to the next pay-cheque. Purchases born of necessity can be made comfortably. Employment becomes a career, rather than a means of survival. You can look your boss in the eye, rather than dreading his gaze.

Why? Because you’ve saved up some money.

Take the cringe-factor out of your life. Erase the dread of the small hours. Put some money in the bank! You may not be able to increase your earnings, but you can decrease your outgoings. This has the same effect as getting a pay-rise; more money for you.

How to save money?

Simple!

Examine what you spend it on.

Then, erase fripperies.

Vices: drinking and smoking are habits that kill you slowly. Save up for your hospital care by giving them up. Your lungs, liver and family will bless you.

Gambling. Gambling is folly. There are only three games the player can use skill to alter the odds even slightly; horse racing, poker and blackjack. These take years of dedicated and expensive research to get good at. And you don’t get rich. All the others will beggar you quickly if you play them. The odds are stacked against you, deliberately, by those who own the game.

Luck favours the bold, special need, or those under the protection of the saints. Betting is not brave, it’s a compulsion, and no god watches out for gamblers. Examine the feelings that surround your impulse to gamble; you will find they eat away at the energy of your life.

Food. There is food that nourishes, and food that enervates. The former is cheaper: fresh fish, fruit, vegetables, clean water. The latter is more expensive, more garishly packaged, and more poisonous: potato crisps, sweets, fizzy drinks, burgers. Consider that you don’t fancy junk food if you are sick; your body knows it takes too much energy to digest, and does not nourish.

Clothes. Do you need to buy fashionable clothes, so you can look like everyone else? If you need to blend in, fine. You can be sure the leaders of fashion don’t. They head to charity shops and buy Harris tweed and old lace for pennies. They get suits made to measure by sweated labour in Thailand. That’s how they get that ‘unique’ look. What’s that, you don’t like the idea of sweat-shops? Guess what, that’s where a lot of fashionable clothes get made anyway. It’s called ‘outsourcing’ and ‘offshoreing’.

Automobiles. Running a car in the UK costs about £5000 ($9000 USD) a year, all-in. Save, by buying a second-hand auto. Save, by buying a less powerful, more fuel efficient model. Save further by thereby getting lower insurance and road-tax.

Personal foibles: I used to buy a lot of internet magazines. These cost up to £5 each, or about $10 in USD. I found a lot of information about the internet, was already on the internet, so I stopped buying the magazines. There are very few papers or magazines worth reading. Find the few that inform, rather than titillate, waffle or distract. Visit the local library, it’s free. Drop in to a ‘Borders’ bookshop, and have a free read.

Debt. Don’t buy what you can’t afford with someone else’s money. Credit cards are an expensive way of getting a loan. Try your friends or relatives first. Your local credit union is a good option; better rates, better terms, friendlier faces. Better yet, don’t borrow. Live free. Keep away from the loan-sharks. You can manage without that holiday.

Put your saved money in a high interest, 180-day notice account. Put it in a bank different to your current one, in case the latter goes bust. Make a mental note that it’s for emergencies only, then contrive to live ’safely’.

Save up enough to last you a year and a day off work, and notice how much calmer and confident you feel!

About the author: T. O’ Donnell (Personal Loans) is an ecommerce consultant in London, UK. His latest project is a loan calculator, available at (Secured Loans UK).