Tips

Five ways to borrow money more cheaply

If you want to borrow money, then you will find that it could be expensive. There are things that you can do though, in order to reduce the cost of this. Some of these are explained in more detail below.

Improve your credit rating

If you have a poor credit rating, then it is likely that you will not be given such a favourable interest rate on money that you want to borrow. It may even be that you will be refused a loan. It is worth checking your credit report to make sure that it is all correct as there could be items in there which you are being penalised for, but they are incorrect. There may be outstanding payments that you could pay off if you knew that they were making a difference etc. Even if your credit rating is correct you may find that you will be able to improve its till, so look online to find out how.

Do your research

It is good idea to research all the different types of lending in order to find out which one will be the best for you. There are different types of loans, payday loans for example, for different needs and they will vary in the amount you can borrow, the term and the cost. It is also a wise idea to compare lenders as they may vary in price for exactly the same product. It will take time to look through all the lenders but it will be worth it. There are comparison sites which can make things easier, but they will only include certain companies so they may not list the best option for you.

Get a good financial advisor

If you do not want to do this research yourself then you could use an independent financial advisor. They will be able to explain to you about all the different types of lending and which will be the most appropriate for you. They will also be able to show you the costs associated with different loans and help you to choose.

Borrow the least amount you can

It is always wise to borrow as little as possible. You obviously need the money for some purpose but try to not borrow more than you need. Remember that every penny that you borrow will cost you in interest payments and so the less you borrow, the less you will pay for it.

Go for the shortest possible term

If you repay over a long term, then you may find that the interest rate is lower. However, the total amount of interest you pay could be a lot higher. Work out the cost of the loan by calculating the fees plus the interest payments each month. Then you can clearly see which way of borrowing is more expensive. For example, a mortgage will have a lower interest rate than a loan. However, it is paid back over decades whereas a loan may just be a few years and if you calculate the cost of borrowing, the loan could be very much more expensive.