Tag Archives: Borrowing

Financial Discipline – Five Tips On How To Use Your First Credit Card

More and more people turn to credit cards in order to boost their scores and secure better loans in the future. But other than that, your first credit card can also become the first step in establishing good financial habits and building a proper financial future. All in all, here are a few tips to ensure you use your credit card without causing yourself any trouble.

Decide on a budget

While you can use the credit card for rewards or short term loans before your pay day, avoid using it for things that you cannot afford – not in the literal way. You need to be realistic regarding the amount of money you can repay before shopping for anything – consider paying everything by the end of the month.

It might be a good idea to stick to a 50/30/20 rule or something similar. Spend 50% of your income on mortgage or rent and utilities, use 30% of it for things you like but you do not necessarily need and spend the remaining 20% on your debt or savings.

Get a direct debit

Most credit cards will allow you to set a direct debit – an automatic payment for the bank to get the money out of your account all the time. You need to ensure the money is there though. The good news about this technique is you will never have to face late payment fees should you forget about the due date.

If you cannot pay for the full balance, try at least to pay more than the minimum requirement. Keep in mind that paying bills and debt in time will help your credit score. In fact, you might as well use your credit card even if you do not need it – simply repay it right after, so it helps the mechanism growing your score.

Grab the rewards

Most credit cards come with some sort of rewards – not all of them though. If you have a card with such rewards, make sure you understand how they work. Get cash back or points by using your credit card in shops or facilities that provide access to rewards, such as petrol stations or clothing shops.

You can get rewards in all kinds of forms – do not let them collect dust. Whether it is a gift card, a cheap flight or a check, use the rewards. Many of them have expiration dates – you should find such small details on the fine print.

Become familiar with the fees

Adopting a healthy spending behaviour can help you avoid most fees – apart from the annual fee, if any. Make your payments on time or even better, pay the full balance within a month. Avoid dealing with cash when using your credit card as it will most likely bring in some fees, not to mention transactions abroad.

While you can use your credit card on holiday abroad, it may not be a good idea, as fees will build up.

Keep track of your expenses

Keeping track of your purchases is related to your financial behaviour – the better you are at it, the more stable your financial future will be. First, you have to determine how much you can afford to spend. Second, keep track of your purchases – it helps if you install the application on your smartphone, as you have everything at a glance.

Once you reach that limit, practice good discipline and avoid using the credit card until you pay the balance.

Bottom line, credit cards can be fascinating and challenging at the same time, but a little financial education can help you make as much as possible out of them.

Four Things You May Not Know About Personal Loans

You want to borrow some money and you know the basics already. You need to borrow as little as possible – just what you need. Shop around and never settle for the first deal you get. Check your credit score and fix the history if you see any incorrect entries. This is common sense, but how do you avoid disappointment? Everything looks perfect, yet you cannot secure a very good deal. So, what else should you know?

Loyalty means nothing

When thinking about a personal loan, you want to stick to the bank you have a current account with. It makes perfect sense – you feel comfortable with it. Plus, this bank has access to all your finances. You know that you can handle this loan and based on your banking history, your bank should figure it out too. However, all this loyalty does not guarantee the best deal out there.

In fact, you are more likely to get a better deal from a lender who might want to attract new customers. The thing with banks is that most of them require you to have an account with them in order to get a loan, so you might need to go through this procedure first. Some of the benefits could include more flexibility when it comes to the actual terms, as well as a lower APR.

The lack of loyalty from banks is another good reason wherefore you have to shop around.

The loan term could make the difference

How long do you need to pay the loan back? This is one of the most important aspects to consider. The so called loan term tends to make the difference because it affects the total pay. For example, if you expand it over a long period of time, you will obviously pay more in the interest.

But on the same note, a long term also implies smaller monthly payments. At this point, you need to determine whether you want more flexibility with your monthly finances or you need to finish your debt as quickly as possible.

Get a fixed interest rate

Having a fixed interest rate gives you a bit of peace of mind. It also helps when planning your monthly expenses. In other words, your monthly payment stays the same throughout the loan term. Even if general interest rates change, yours will stay the same.

These days, many personal loans come with fixed interest rates, but this is not a general rule. In other words, you should still double check the fine print before sending your application.

Consider other options

The amount of money you need to borrow will determine how financially efficient your loan is. Sometimes, the terms associated with a personal loan could be outweighed by the terms coming with a credit card. After all, you can avoid the interest rates for a while if you use a credit card. This option is handy if you need to borrow a small amount of money – usually less than £5,000. Small personal loans will attract a high interest rate after all.

It is all about getting a good limit, not to mention a long introductory period. Stick to the monthly payments and try closing the debt before the introductory period is over. This way, you basically get a loan with no interest whatsoever.

In the end, personal loans can be challenging, but there are a few ways to plan them accordingly. Avoid common misconceptions and analyse all your potential options upfront. Other alternatives might come in handy too – take your time to shop around and make a good decision.