Author: Mike

I may not have a formal financial education, however, I have had enough dealings with banks and various financial services to learn the ins and outs of some highly lucrative lending and money-saving strategies. From finding new ways to save money without having to cut back on expenses, to lending strategies that come with a minimal interest rate, I've tried them all. Now, I want to share what I've learned with as many people as possible. Handling one's finances should never be a chore. I've experimented with the deals that banks offer so that others won't have to. Now, it's time I showed others what I've learned.
Credit Scoring

How to Maintain Good Credit?

Loans have become a popular commodity not only in the UK but anywhere in the world. When people are short of cash, they turn to short term loan lenders. These loans are usually in small amounts, from £100 to a few thousand. One reason why this type of loan is popular is the ease of getting one. You can apply for a loan today and get the funds a few hours after submitting your application.

In most cases, you do not have to visit the lender’s office. You apply online and get the funds online.  However, some lenders may conduct a credit check on you before they approve your loan. Having good credit would lead to a quick approval and release of your loan, while a bad credit history may result in the rejection of the loan application. For borrowers, having an excellent credit score or rating is very important for a successful loan application.

Ways of Keeping Good to Excellent Credit

When you use a credit card, open a bank account, or buy something on credit, credit reference bureaus stat to monitor your credit behaviour. Some people think that having no debt at all and purchase cash all the time can result in an outstanding credit rating. Only a few are aware that to build a credit history, one must establish a credit record that is good to excellent. In the UK, there are credit reference bureaus that keep a record of peoples borrowing habits. These are TransUnion, Experian, and Equifax. These agencies work with banks and other financial institutions, credit card companies, building societies, mobile phone companies, and other retailers.

Whenever you have credit transactions with these business entities, these agencies would start monitoring your borrowing habits.  A credit score of 721 to 880 will give you a fair credit rating while a score of 881 to 960 has good rating. A good credit score will open the door of all lending institutions for you.

Here are the best ways to maintain a good credit rating.

Always Pay Your Debts on Time

Paying your debts before or on the due date will do wonders to your credit rating. The credit reference bureaus keep a record of your payments. You might think those small debts do not matter, but they do. Avoid neglecting to pay small debts and utility bills, big or small.

Keep Credit Card Balances Low

Many credit cardholders use their cards to the maximum, but this habit can hurt your credit rating. If you have a credit limit of £5000, spend only a maximum of 30% or lower. Maintaining a low balance will show credit card companies that you know how to manage your money. You can expect a good credit rating from them.

Have Few Credit Accounts

Credit cards are helpful if you happen to run out of cash. However, use them sparingly. Having several credit accounts and using them to a maximum level would show your spending habits. It is fun to shop when you have thousands on your credit account. Nevertheless, this can tempt you to spend more than what you can afford at the moment. Before you know, your debts have accumulated to a point where you can hardly pay your bills on time. Your credit score would plunge and you will have difficulty building it again.

Watch Out for Errors in Your Credit Report

You can easily access the websites of credit reference bureaus. Regularly monitor the entries in your credit record. A small debt that you have already settled, but were not yet marked as paid can negatively affect your credit score. Once you see the error, you can dispute it and ask for correction.

Credit Scoring

How to Borrow Money with a Very Low Credit Rating?

 

Almost everyone will have to borrow money, at one point or another. When it comes to getting smaller amounts of money, people tend to borrow from family or friends, however, larger expenses may require getting a fully-fledged loan. This is not a problem for individuals who have had great relationships with banks and have slowly built up their credit rating. This having been said, not everyone has a perfect credit score and this means that some people simply do not have access to proper banking services.

Luckily, banks are not the only ones who can offer loans. While they are the most popular choice, there are other ways to legally borrow money, regardless of one’s credit rating. Please note that we won’t look at traditional lenders such as pawnshops or community lending associations. Instead, we will talk about reliably borrowing money online.

The Main Online Lending Platforms

There are 3 main ways through which individuals with low credit ratings can borrow money online:

P2P Lending Websites

P2P lending websites work by putting lenders in contact with borrowers. The platform itself only oversees the transactions, ensuring that all parties follow the terms and conditions. Generally speaking, these websites allow users to buy moderate amounts of money (up to £2,000), for up to 60 days. However, these terms can vary from one platform to another.

Pros

  • The platforms do not perform credit checks or report the loans to credit registers;
  • Very few requirements for signing up;

Cons

  • It can take up to one week to have your loan request approved;
  • Loans are limited to certain amounts;

Online Lenders

These are similar to banks, in the sense that they regularly come up with specific deals that they then market to anyone interested. However, they do come with several advantages when compared to traditional lenders. First of all, they do not perform any credit score checks. This enables individuals with low credit rating to borrow money without worrying that they might not be eligible.

Pros

  • They are a good alternative to banks;
  • No credit checks are performed to determine if the user is eligible or not for a loan;
  • Can be used to borrow large amounts of money;

Cons

  • The loans come with higher interest rates than those from banks;

Lending Apps

For the Android as well as the Apple Appstore are filled with apps that enable people to get micro-loans. These apps are great because they only require proof of identity, proof of address, and an active bank account to work. Furthermore, requests are processed instantaneously, turning them into useful tools for situations when you need a few extra pounds to pay a utility bill or the rent.

Pros

  • They are an easy way to borrow money in a matter of seconds;
  • Low-interest rates;
  • Great substitutes for credit cards;

Cons

  • Only suited for borrowing small amounts of money;
  • Most apps are riddled with ads, making it difficult to navigate through the menus;

Each of these platforms is useful in its own right and all of them can be used by individuals who have low credit scores. Please keep in mind that none of them performs credit score checks, however, you will need an active bank account to get the loans. This having been said, the money that you borrow from the apps will not show up on your bank statement as a loan, but as a regular transaction. Furthermore, all three of these types of platforms are heavily regulated by the government, so your personal and financial data will not be disclosed to third parties without your consent.

Borrow Money

3 Alternative Ways of Borrowing Money

Properly budgeting one’s income to pay all the monthly expenses and also have some left for various creature comforts is sometimes extremely difficult. This is especially true for fresh university graduates that are living in rent, looking for a job, or simply have one that pays too little. In most cases, not earning enough money to pay for both regular as well as unpredicted expenses, such as medical treatments, pushes many to get loans from banks or other private lenders. While this solution is perfectly reasonable in the short term, continuing to borrow money on a weekly or monthly basis (and in some cases failing to repay them on time) can cause serious damage to one’s credit rating. This can have serious consequences such as the inability to borrow any more money and, in some cases, even losing one’s personal property to the bank.

This having been said, there are ways to get short-term loans or micro-loans without worrying that it will lower your credit rating. These are all legal and properly regulated by the government, however, they are either not considered loans in the financial sense of the word or they are not reported to any of the major credit registers in the country. Here are the most popular methods:

·      P2P Platforms

There are hundreds of both national and international P2P online lending platforms that are available to anyone interested. There are very few restrictions to join and once you become a member of a platform, borrowing money can take as little as a couple of days. However, this depends on the amount of money that you need to borrow.

P2P platforms work differently than banks. They do not offer loans, but they do put borrowers and lenders in contact with one another. The platform itself only acts as a safeguard to ensure that the terms and conditions are respected by all parties involved. Furthermore, these websites are not part of any banking system, which means that the transactions will not be reported to credit registers. Furthermore, most platforms do not perform credit score checks, making them a great choice for those who are either just starting and do not yet have a financial history, or for individuals who would not be eligible for a regular loan.

·      Money Lending Apps and Online Services

Both the Android PlayStore as well as the Apple AppStore are filled with these apps. Money lending/borrowing apps enable individuals to create user accounts that they can use to borrow money in the blink of an eye. The requirements for creating an account are usually only proof of address, proof of identity and a bank statement (to link your bank account to the app). The main advantage of using these platforms is that you can take out micro-loans in a matter of minutes. Once a loan has been approved, the money will be automatically transferred to your bank account. Furthermore, once the app and bank account are linked together, the money that needs to be repaid can be set up to be automatically withdrawn from your current balance.

·      Pawnshops

Few people think about borrowing from pawnshops when they run out of money. While it is true that most of these businesses attach evaluate the collateral that you offer at a lower value than they should, they are legitimate companies. In other words, you can always be sure that if you borrow money from them and repay it on time, they will keep their end of the bargain. Pawnshops are usually a great last resort for those who urgently need money to pay their rent or utility bills, however, they are not great as a recurrent loaning tool.

Property

What Are HELOCs and How to Get Them?

HELOCs, also known as “home equity lines of credit”, are loans given out by banks and various private lenders. From a structural point of view, HELOCs are strictly secured loans where the borrower must offer his home as collateral, somewhat similar to a second mortgage. As with all lines of credit, the amount of money that the lender receives is usually proportional with the collateral that is required for the loan. This makes HELOCs great choices for individuals who plan to make substantial purchases.

This having been said, what is required to get a home equity line of credit and what are the restrictions that come with it?

First of all, it is important to mention the fact that all homeowners can get a HELOC, and that they can be received on top of the mortgage. While every lender will have different financial requirements for this type of loan, in most cases, the only things required will be owning a home (house or flat), having paid a certain portion of the mortgage on it, and having a good enough credit rating.

The Home

As far as the home is concerned, applying for a HELOC will require homeowners to have their home appraised by a professional. This will give the lender an idea regarding how much money can be loaned. Depending on the lender, homeowners may have to either choose their own company for the appraisal or have the bank send someone. Everything from the location of the home to its condition will be a factor in the appraisal process. Once this matter has been concluded, the lender will check the status of the mortgage.

The Mortgage

HELOCs are available to all homeowners, regardless if they have finished paying the mortgage or not. However, in the latter situation, the lender may require applicants to have repaid a certain portion of the mortgage before they can get the line of credit. This depends on each lender.

The Credit rating

An individual’s credit rating is important in all bank-related matters. Depending on its value, the lenders will decide if you are eligible or not for a HELOC. Furthermore, your financial track record will also affect the terms and conditions that you will receive from the lender. The better your credit rating is, the lower your interest rate will be. In some situations, lenders may even offer less money based on the applicant’s credit rating.

What Are the Restrictions for HELOCs?

Almost all loans come with restrictions when it comes to what the borrower can do with the money. However, lenders do not typically impose any limitations on HELOCs. The borrower can use the money for any type of purchase and, just like any other line of credit, he only pays interest for what has been borrowed. In other words, a HELOC does not give an individual access to a large amount of money for a particular purchase. Instead, the lender gives the borrower access to a bank credit account that has a certain withdraw limit on it (established in relation to the value of the home). The lender is then free to only withdraw/borrow a portion of the money or to max the account as he sees fit. For example, if the HELOC is £350,000, and the lender is looking to pay for a holiday that only costs £5,000, then he will pay interest only for the £5,000. The rest of the money will be available to him until the agreement ends, however, the lender is not obligated to withdraw a set amount of money.

Lastly, please keep in mind that lenders also place administration fees on HELOCs. These must be paid on top of the monthly interest rate.

Loans

How to Prepare to Apply for a Fixed Interest Loan?

 

Fixed-interest loans are some of the most popular services offered by banks. They are easy to get, have relatively high terms and values, and can be integrated into any monthly budget. This is mainly because the repayments for a fixed-rate loan will always be the same, making the planning of one’s monthly expenses simple. However, as easy as it, might be to apply and get one of these loans, there is no guarantee that the debt will be affordable. The terms and conditions offered by lenders are still dependent on your credit rating and the information that is contained in your permanent financial records. If these two are not in order, then there is a high probability that the bank will either place a lower limit on how much money you can borrow, or attach a higher interest rate to the debt.

Increasing Your Credit Rating before Applying for a Loan

All lenders first look at an individual’s credit rating before drafting the terms and conditions of a loan or line of credit. This score is, in many ways, all the information that banks need to assess the risks for giving someone a loan. It is important to keep in mind that credit ratings are built up over time, and reflect an individual’s financial habits and history of financial decisions. In other words, it is difficult for someone who has a low credit rating to increase it overnight. This having been said, there are ways to give it a boost, before applying for a loan. Here are the most important things that you can do:

Pay off Your Credit Cards

An individual’s credit rating includes how much credit he is currently using. When lenders look at your financial records, they first look at your credit utilisation ratio. This is the percentage of credit that is available to you, that you are using. For example, if you have a credit card that has a £5,000 and you have used it to pay for items worth £2,500, then your credit utilisation ratio is %50. While the acceptable limits for different lenders tend to vary, it is usually better to keep your credit utilisation ratio under 30%.

Avoid Using Your Credit Cards on a Regular Basis

Credit ratings also include how often an individual is using his credit cards. Using them too often will indicate to the lenders that you are unable to properly manage your income and are dependent on the additional credit accessed through the cards. This will increase the risk factor of the loan and you will get unfavourable terms and conditions. 

If you need to access funds for more expensive purchases, a good alternative to credit cards is using an online lending service. These do not report their activity to any of the major credit registers, which means that borrowing money from an online lending service will not be market on your financial records.

Close Any Accounts or Credit Cards that You Are Not Currently Using

Interest rates are also calculated based on the amount of credit that is available to an individual. This is why it is usually better to close any unused credit cards or accounts that you might have.

Avoid Sending Several Application Forms in a Short Time

These applications are marked on your financial records and can reduce your credit rating. Most individuals that send these do so to find out what kind of deals they would receive from different lenders. However, there is always the option of using the online interest calculators that are present of the websites of the lenders to find out how much you would have to pay for a particular type of loan.