Borrowing money in the form of unsecured loans and credit cards is an accepted part of contemporary life. Too much debt can be costly, especially if you have adverse credit and are having to pay an inflated rate of APR.
Before considering the ways that a better borrowing deal can be secured, it is advisable to check that your own personal information is correct and full. Inaccurate information can result in a higher rate of APR being charged or even being declined for credit.
Check Your Credit Report Hasn't Got Any Errors on It
It is imperative that your credit report doesn't have errors on it. It is possible to get a copy of your credit report for only £2 and this will mean that errors can be challenged and corrected before making credit applications.
Another important thing is that you shouldn't make too many applications for credit. Each will result in a credit search showing and this will stay on your credit report for a period of 12 months. The more searches the less likely it is that your applicaion will be approved.
The Electoral Register
If you aren't registered on the electoral register you are far less likely to be approved, even if your credit is good. If you are registered, make sure that they have your name and address entered correctly.
Borrowing Money at Low APR
Once you are certain that information held about you in your credit report is accurate it is time to consider a few clever ways to secure cheaper finance.
Credit Card Balance Transfers
If you have a credit card with a large balance look to transfer it to a new card. It is normally possible to get a 0% APR introductory rate for 12 months and this can save several hundred pounds.
- A £5000 balance at 17% APR costs £850 per year in interest alone.
Use the money you have saved to reduce your balance. When the introductory rate expires, take out a new card and repeat the process. This will allow you to remove your credit card balance without paying a penny of interest.
Always remember to compare credit cards on a cost comparison site.
Transfer Existing Loans to Secure a More Attractive Rate of APR
Put together a breakdown of your loans, including the amount, term and rate of APR. Identify a loan that offers a more favourable rate of interest and transfer it across.
Avoid Increasing the Term of the Loan
Don't increase the term of the loan as this will add thousands to the amount borrowed.
- A £25,000 loan over 5 years at 17.9% would result in you paying £13,008 interest. However, the same loan at just 7% over 25 years results in you paying back a colossal £28,008 interest.
A lot of people are tempted into longer-term home owner loans and don't have the situation explained to them properly. The sooner you can pay off finance the better off you will be.
Don't Turn Unsecured Debt into Secured Debt
If you have previously been granted an unsecured loan, don't now turn it into secured debt so that you can borrow more. This will mean that you stand to lose your home if you can't keep up with the repayments.
If you are experiencing financial difficulties, it is worth considering one of the many debt solutions available such as a Debt Management Plan or Individual Voluntary Arrangement (IVA).
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