The importance of responsible borrowing

by official on July 1, 2014

The popularity of payday loans has drastically increased over the past few years. They have made it easier than ever before for consumers to get the money they need, when they need it.However, despite the positive effects they can offer, payday loans can also potentially lead to further financial troubles. Therefore, it’s imperative to make sure if you do borrow from a payday lender, you do so responsibly.

Understanding responsible lending
As published on Experian, payday lenders are required under the responsible lending act, to provide clear information on their rates, terms and conditions. They are also required to assist consumers who fall into difficulties while repaying their loan. All lenders should carry out checks to see that the customer can repay the loan before they accept the application.

When they first started out, payday loans were so popular because many lenders didn’t carry out a credit check. It meant those who have had financial troubles didn’t get penalised. However, after it became apparent that many consumers were getting into further financial difficulties due to borrowing more than they could afford. This is what led to a change in the regulations.

These days all responsible lenders are required to carry out adequate checks before they accept an application. That’s why when you apply to a company such as Wonga, they will carry out a credit check to ensure you can pay the loan back.

Wonga has gained an excellent reputation in the payday loan industry. Not only do they carry out adequate checks, they also offer clear pricing and terms of conditions. In addition, if customers struggle to repay their loan, the company will help in any way that they can. Repayments can be extended or a repayment plan can be set up.

Even the Church of England is getting involved
Recently, the Church of England has become so concerned over irresponsible lending it has released a rap highlighting the dangers.

As reported in the Anglican Communion News Service, the rap is aimed at young people who are thinking of taking out a payday loan. It was inspired by the comments made by the Archbishop of Canterbury on irresponsible lending. Created by Charles Bailey, the rap entitled ‘We Need a Union on the Streets’ even features popular money expert ‘Martin Lewis’.

Lewis has long expressed his concerns over payday lenders. The trouble is, it’s become so easy to get the cash you need at just a click of a button that it’s become part of normal day life for many people. It is important people do understand the risks of borrowing before they apply to a lender.

Using payday loans responsibly
While there is no denying the fact there are risks involved in borrowing from a payday lender, there are also a lot of positives that can come if you borrow responsibly. When used correctly payday loans can:
- Help out in emergencies
- Lower stress levels
- Tide you over until your next payday
They are primarily designed with emergencies in mind. It could be an unexpected bill or emergency home repairs. Whatever the emergency, being able to get your hands on the cash to fix it can really help.

It lowers your stress levels as you don’t have to worry about how you’re going to survive until your next payday. Many people have found them to be useful in their time of need. The question is how can you make sure you’re borrowing responsibly?

Key to borrowing responsibly
There are a number of measures you can take to ensure you’re borrowing responsibly. Firstly you need to be sure you can pay back the full amount, plus interest on the money you need.

It can be tempting to apply for more money than you actually need. Don’t do this. It may seem like it’s only an extra £20, but when payday arrives you could soon find that £20 makes all of the difference.

Another important thing to look into is the lenders reputation. Are they a well-known lender? If not you need to know that you’re taking a big risk if you apply with them. It’s always better to apply for the bigger lenders as you know they are more likely to follow fair lending guidelines. Be sure that the prices and terms and conditions are made perfectly clear.

AUTHOR BIO

Jessica French is a full-time mum and part-time blogger. She advises her readers on how to save the pennies.

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Starting a career in finance

by official on December 19, 2013

Some of the best-paid careers are to be found in the world of finance, and this has been the case for many years.  The financial industry also offers a wide range of possible career paths and specialties; however, to make the most of the prospects on offer it pays to get off to a good start by choosing the right subjects to study.  It is also important to consider whereabouts on the career ladder to make an entrance into the business.

Different finance careers 

The breadth of career options within the finance industry is such that there are positions and career paths for people with many different talents and interests.  From ‘shop-front’ positions, such as a bank cashier or personal financial advisor, to roles that are more behind the scenes, such as a stockbroker or auditor, the world of finance brings a wealth of challenges and makes possible high reward.  In specialties such as investment banking, bookkeeping, mortgage lending, and others, it is helpful to have sufficient background knowledge and education to be able to either start in a good position, or to move swiftly up the career ladder within a given organization.

Different options available for studying finance

One of the best possible starting points for any career in finance, regardless of the specialty involved, is a sound and respected education with a suitable degree.  While this does not necessarily have to be a finance degree, studying finance as at least part of a degree programme can provide an advantage in getting ahead in a financial career. A number of options for studying finance can be found on an online course listing for a finance degree.  In addition, successful studies in subjects such as mathematics and economics can add substantial weight to a job application. The right combination of studies can lead to an initial role in banking, insurance, financial services, and a number of other different broad sectors within the finance industry.  These different options for studying finance can open up career possibilities in a field of business that touches nearly everybody’s everyday life.

Some sectors to be studied in a finance degree 

The course listings and the options available are, of course, strongly tied to the different sectors of finance that can be studied.  There are many such sectors, some of which are more popular or more specialist than others.

Accounting  

This is a field that should not be ignored for the valuable background that it provides in the nuts and bolts of financial transactions.  Budgeting and reading financial reports rely heavily on skills in accounting, and these are widespread tasks in finance.

Personal finance  

This is another sector that has a wide significance, with its links to the loan market, banking, and insurance.  It is also an area that can contribute to an individual’s life skills, giving insight into managing and investing private funds.

Investment banking  

A potentially highly profitable sector for an individual with the right skills and stamina that likes the rush of adrenalin.  It is also one of the sectors with a higher profile in the media in recent years, and it is an area of study that can provide extensive knowledge to apply to the wider financial world.

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Most people are attracted to medical credit cards because of their excellent terms of use. Most of these cards offer financing on long-term and interest deferred plans – besides carrying an instant approval for loans. The credit card options benefits are too attractive – yet, it is very important that you do not accept the first card you see if you want to get the best deal out of these types of credit.

You need to set your excitement aside and look a little deeper in to the options offered by these types of cards before you make an informed decision. Here are a few factors that are very important for this decision:

Do Not Go For Face Value – Most people learn about medical credit cards in the office of their family doctor. This is because most of the providers would use the offices of doctors to promote the cards. These cards are a boon for health conditions that are not normally covered under health benefits. Doctors who have such patients usually partner with 3rd party providers to provide attractive financial deals to their patients.

This looks like it is a win-win situation where the doctor gets paid fast, and the patient can pay the bill in installments without any major financial pressure. However, this is not the case always. It is not that the doctor is knowingly pushing you into any deal; rather, that the doctor too thinks it is a good deal – but he is no finance expert. Hence, be careful of any deal – even when it comes through your doctor.  It will never hurt to check the deal over again and compare it with similar offers in the market of other providers.

2.    Pay Attention To The Terms And Conditions – Make it a point to read the fine print. The deal is not always a bed of roses. For example, when a loan repayment is deferred over 24 months at much lower interest it sounds wonderful. The fine print will mention however, that if the repayment is not completed within this pre-agreed 24 months period, standard charges will apply with effect from the time of the first purchase you made on the card. This will be totally crippling. Do not sign up for the deal unless you are sure that you can abide to the terms and conditions with which they are offered.

3.    There Are No Free Lunches – Keep this in mind when you are signing something because they charge 0% interest for a period. Do not let the lender tell you how much you need to pay per month. More often than not, the tiny amount that they quote as the due repayment per month is just the minimum payment for the amount lent. In the end, the monthly installments can shoot through the roof and if you are not prepared it can upset your budget significantly, or worse push you to default when you will end up paying penalty and higher rates of interest. When offered the loan take out your own calculator and calculate your monthly installments. If the amount does not match, ask for clarifications then and there. You will be surprised with the answer.

 4.    There Are More Fish In The Ocean – It is wonderful to be offered a loan when you need it most, i.e. when you are told by your doctor that you need a medical intervention that costs an arm and a leg. However, no matter how relieved you feel, do not rush into anything. There are more options out there, more providers, more schemes, more offers, more discounts, more avenues. In other words, when you are looking for a deal ensure that you looked at all possible options available in the market on medical care loans before you sign on the dotted line.

 This guest post was submitted to help readers find better ways to save on their credit card expenses.

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How do money market accounts work?

by official on March 28, 2013

A money market account is a savings account with a difference, in that in return for larger scale deposits it offers a highly competitive rate of interest, sometimes called the real rate. A money market demand account or money market deposit account (MMDA), are exactly the same; however, money market funds are different, which is important to be aware of. Here is a quick guide to which is which and how each one works.

Money market accounts

As money market rates of interest are generally higher than regular rates, customers usually have to maintain a minimum balance in their account to benefit from the more attractive money market rates of interest. The minimum balance required may be up to $2,500, though it might well be much more. In addition, some banks or credit unions restrict the number of transactions allowed in any particular month; for example, setting the limit at three to six withdrawals or less.

How money market accounts work

Money market accounts usually attract a daily compound interest rate, which is paid monthly. This means the lender pays interest on the interest, as well as on the original sum. Interest rates can vary quite considerably; the more money held in a bank account, the higher they can be. In terms of convenience, it is always worth checking the extent to which a bank offers flexible access to money; for example, by check, debit card or online, alongside a high yield. Deposits in money market accounts are FDIC insured, which means the Federal Deposit Insurance Corporation will protect them in the event that a bank or credit union goes out of business, usually up to a limit of $250,000.

Money market funds

While a money market account is a form of savings account, a money market fund (MMF) is a mutual fund. Even though it is possible to invest in a MMF via a bank, a money market fund is not a bank account and therefore does not have FDIC protection. This is important, because an MMF can make investments in the short-term debt of the U.S. government and its agencies and in the short-term obligations of foreign and domestic banks and corporations. The level of risk is therefore greater than that of a money market account.

Short-term interest rates have been badly hit by the recession and while money market accounts might pay around 0.5 percent, on average, money market funds tend to scrape along at around 0.03 percent. Shares in MMFs are designed to be held stable at a value of $1, although prices slipped below this level in 2008. Every time an investor collects $1 in interest, another share is added to the funds. Regulations are being tightened to avoid any recurrence of share price slippage.

Which is best?

Money market funds tend to be convenient and can provide ready cash when needed, but they pay lower interest rates at times of financial uncertainty. At the moment, money market accounts are the clear choice for those seeking higher levels of safety and yield. Should interest rates start to rise, however, money market funds may well regain the upper hand and start paying higher rates than money market accounts, which they often did prior to the financial crisis.

 

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A credit card is not just a convenience in this age, it is a necessity. Not only do you need a credit card for your daily transactions, you also need it to get loans such as car loan or a mortgage. Creditors look at your credit card history, through your FICO score, to find out if you are a trustworthy lender. That is why we have collected the four major factors to consider when you get your first credit card in the following sections. These factors will help you compare credit cards, so that you can choose the card that best suits your needs.
Now let us look at the four factors that go on to define a good credit card.
1. Annual Fee A lot of cards have an annual fee that will be levied even if you do not use the card even once in the year. However, you can also apply for and get cards that do not have an annual fee. It should be noted that cards with an annual fee usually have a lower interest rate, so if you get a card without an annual fee, you should be careful with your purchases and about paying it back.

2. Interest Rate This is the interest that you will be charged if you do not pay your credit card bill in time. Credit card bills are usually paid in a billing cycle, so the bill for every purchase made within a specified period, which can be 30 to 50 days, is paid for on a specified fixed date every month. In short, if you use your credit card, and pay the credit card bill on time, you won’t be levied any interest; and the interest is levied only when you do not pay your bill in time. It should be noted that many a times this interest rate is mentioned for a month; when annualized, such interest rates are much higher than normal interest rates for other loans such as car loans.

3. Credit Limit This number, in dollars, specifies the total credit that you can get from the card. For a student, it is common to see a credit limit of about $1000. If you are a professional or employed in regular job, the credit limit will depend on your income. So it is common to show your income statement when you get your credit card. This is also called the spending limit.

4. Rewards Points or Program Finally, almost every credit card has a reward system using which they try to encourage people to use their credit cards. Not every rewards system is rewarding to the buyer, so you should be careful when considering or using a rewards system. When you compare credit cards, and find that the first three factors are similar, the rewards feature can help you decide what card to go for. For example, if you are a frequent air traveler, you should go for a card that has a reward points system for buying airline tickets.

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