PMM Finance and Loans

Get advice on loans and all things finance related.

From the blog

When is the Right Time to get a Personal loan?


A personal loan is something that many of us take advantage of from time to time. They are unsecured which means that you do not have to have a home or car to secure against it so they are more available to everyone. You tend to be able to borrow more than £1,000 and repay it in instalments. If you are considering getting a loan like this, then you may wonder when a good time might be to get one out. It is worth considering a few things to help you make up your mind.

Can you afford the repayments?
It is well worth finding out how much you will be expected to repay each month and how long for. This will not only allow you to calculate the full cost of the loan, but you will be able to think about whether you are likely to be able to afford the repayments. You will be able to see the difference between the money you have coming in and going out and then you will know whether there will be enough of this money for you to be able to afford the necessary repayments. If you have enough money then you will know that you will be able to afford them. However, you may decide that you do not have enough. In this case you do not have to forget the idea of having a loan but it is a good idea to see whether you can make changes to your lifestyle so that you can free up enough money each month to afford the repayments. It may be that you will be able to cut back in a few areas or find a way to earn more money so that you will be able to afford them.

Are loans competitive at this time?
At certain times loans will be more expensive because interest rates are high. The interest rate varies depending on the rate sent by the Bank of England and so if you want a cheaper loan, you will need to get one out when the rates are low. Although rates can fluctuate month to month, normally they are fairly stable and will only go up or down a little bit each year. Therefore, you will need to decide whether you are prepared to wait until rates are lower before you take out the loan or if you are happy to go ahead anyway.

Will interest rates rise?
Interest rate rises are not hugely predictable but with some common sense you should be able to work out whether rates are more likely to rise or fall. For example, in a time when rates are low it is more likely they will go up than down. However, if inflation and economic growth are slow then there is more chance they will go down too. If the rates are likely to fall, then you may want to delay taking a loan as you may get a better deal, especially if the loan has a fixed rate. However, if you think the rates may rise you may want to get a fixed rate loan quickly before they go up. However, if you are on a variable rate then a likely rate rise will mean your interest payments will go up.

It is always wise to assume that interest rates might go up and plan for that. Make sure that you can not only cover the repayments as they stand but also that you will be able to pay them should they go up due to a rate rise. You should even be able to estimate how much they might go up to and work out the extra that you might end up paying so that you can calculate if you will be able to afford it.

Are there other options?
It is always wise to think about what other options you might have. There are many things that you could try in order to get the money that you want and it is good to consider them all. It might be that you have already done this and realise that your best option is a personal loan. If this is the case then make sure that you compare different lenders to find the loan that is best for you. Be sure to compare the APR rather than the monthly interest rate as this will allow for any administration fees that they include in the repayments that you have to make. Also make sure that you consider other features as well as the cost when you are comparing the loans. You may find that there are other things that are as important or more important than the cost such as the reputation of the lender or the level of customer service. It is worth taking the time to find out a bit more so that you get the best loan for you and your needs.

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How Will Brexit Effect Interest Rates and What Should I do About it?

Many of us are concerned about what effect Brexit might have on us. It could be that we are hoping that it will make things better for us financially or we may be worried that it will make things worse. As we all have different financial situations then changes might affect all of differently. For example, a rise in interest rates could be good for those of us who relay on interest rates for good savings returns but those of us that have loans would find things much easier if interest rates remained lower.

What are Interest Rates?
Interest rates on products are changed by the provider of that product and if they are variable then they can be changed at any time. However, the Bank of England base rate, is changed by the Bank of England and if this changes then financial companies will tend to change their rates as a result. However, some will just change their rates from time to time anyway.

Predicting Interest Rates
It is quite difficult to actually predict what might happen with interest rates. The Bank of England have criteria that they look at in order to judge whether they think that interest rates should be changed. A panel discuss it and then vote on whether there should be a change to the rates and in what direction and if they all agree then the rate is changed. One of the criteria they look at is inflation and the government has set them a target of trying to keep inflation at 2%. This is the change in prices. The aim is not to allow prices to rise too quickly as this will make it difficult for people to afford the things that they normally buy and will not give salaries and wages a chance to rise in order to keep up. By increasing interest rates people will pay more interest on loans and mortgages and this means that people will generally have less money to spend and this will lower inflation. For savers an increase in the rate will encourage saving as the reward for saving is higher and therefore this will also reduce spending. If rates go down then then spending will increase as savers will have less incentive not to spend their money and interest payments on borrowing will be less so many households will have more money to spend as well.

Spending is important for the economy as it increases income for businesses and they can employ more people or increase the salaries of those they already employ and so the economy will grow. However, if inflation goes up really quickly then prices will increase massively and mean that people will suddenly have to find more money just to buy the most basic things.

How will Brexit Impact Things?
Predicting what might happen in the future is never easy. Brexit could mean a lot of things for the UK and until we have agreed terms and it has actually happened it is hard to know what effect it might have. There will definitely be uncertainty for a while which makes everybody worry. This tends to mean that people reduce their investments in the UK which can have an effect on the stock market and the value of the pound and people tend to spend less money through fear that prices might increase. However, this might last just a few hours or it could last much longer. It is very hard to know. Also once we leave the EU people might relax and decide it is then safe to spend lots of money which could in itself lead to an increase in inflation. So it is very hard to predict what might happen and therefore you need to be prepared for everything.

How Can I Prepare?
It is pretty difficult to prepare yourself for everything. However, if you can have your finances in a state where a change of interest rates will not impact you too much then this is probably all you can do. So if you have a lot of loans, then consider whether you can cope with an increase in interest rates. If you rely on savings interest then you will need to think about whether you will manage if rates go down. If you feel that things could be difficult then look at ways that you could potentially earn more money or spend less so that you can more easily manage. You will not necessarily need to act right away; unless you think it would really help to put your mind at rest, but having a plan to fall back on in case you need it can be very useful. Therefore take a look at your bank statements so that you can see how much you normally earn and spend and think about where you might be able to increase your earning or reduce what you are spending.

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