Is it Worth Repaying loans Early?

Many of us have loans and we might often hear about people that repay their loans early and wonder whether we should be doing the same thing. There are good reasons for doing this but it may not always be in your advantage to do so. Therefore, it is worth understanding more about the pros and cons so that you can decide whether it would be the right decision or you or not.

How much are the loans costing?

It is a good idea to start by working out how much your loans are costing you. Some loans can be very costly but there are others that could be free or cost very little. Until you are aware of their cost, you will not be able to make an informed decision. It is important to make sure that you calculate the cost correctly. This may not be as easy as it seems. You might just look at the interest rate but this will not tell you the full story. You may have additional charges or fees that you pay as well. You will also need to think about how much you owe as the interest you pay will be determined by how much you owe. Therefore, looking at the amount that you pay in interest each month is the best way to determine the cost of the loan. If you calculate how much that is in a year as well you will be able to see how quickly it can add up and what you would gain from repaying it.

How much can I get saving the money?

It is also worth thinking about what a difference it will make if you use the money for other things rather than paying off the interest. Perhaps imagine that you were putting it in a savings account instead and think about what interest you might get on it. In most cases you will find that you will be better off if you put the money into paying off the loan. You will find that most savings accounts pay a very small amount of interest and therefore you will not get much return on that money in such an account. However, if you look at the interest charged on a loan, you would save that much interest if you paid the money off the loan rather than put it into a savings account. You will therefore be financially better off if you put it against the loan. This will normally be the case but it is worth checking as you may have a low interest or interest free loan and then you might find it is financially better to put the money in a savings account.

How will I feel having them paid off?

The cost of the loan is not the only factor to consider. It is also worth thinking about how you will feel when you have paid off the loan. Some people feel that they are happier when their loans are repaid, then they do not have to think about finding the money for the repayments. However, there are also other people that feel like they are perfectly relaxed when they owe money and so this will not be relevant to them. It will be a very personal thing and will depend on whether you tend to worry about this sort of thing or whether you are relaxed about it.

Some people also like having a loan arranged. They feel that it gives them access to extra money that otherwise they would not have. This particularly applies to things such as overdrafts and credit cards. You can pay them off, but still keeping them so that you have access to money if you need it can be handy. This could also apply to something such as a flexible mortgage or loan where you might decide to pay off almost all of it but to keep it in case you need to borrow money and you will be able to do so using this.

So, you can see that it is not always a straightforward decision. Although it is normally beneficial to repay a loan early, there are some circumstances where it might be beneficial not to. Therefore, you need to have a think about your situation and whether you think that it will be a beneficial one for you. You also have to find the money to make those extra repayments and that might not be something that you will be able to do easily. It can be a personal decision and even if it is financially better to repay it early, there might be other reasons why it might not be the best decision. Make sure that you think it through carefully and discuss it with other members of your household as well as It could have an impact on them as well.

How to Increase the Amount you save Each Month

Many of us would like to be able to save more money each month. Having savings can be great for a number of reasons. It can help to pay for a large luxury, such as a holiday, it can cover emergencies to save you having to try to find a loan and it can give you peace of mind that there is money there. However, it is not always easy to save up money. It can feel hard to afford everything and then have some left to save but there are things that you can do which could help.

Put Money in Savings Regularly

It is a good idea to start by saving money regularly. This will mean that you will be more likely to be able to build up a pot of money rather than just saving money on a more ad hoc basis. It can be best to set up a direct debit so that you can have the money transferred automatically on the same day each month. This will enable you to not have to rely on remembering to do it as it will always happen. You will need to decide how much to transfer though. You need to transfer enough to add up to a decent amount of money but you need to make sure that you can afford it. It is wise to work out how much you can actually afford as you do not want to leave yourself short of money to pay for essentials. It can be wise to calculate how much you spend on essentials and how much you have coming in income wise so that you can calculate how much you might be able to afford to save up.

Put Money in Savings first

Once you know how much you can afford to save you can set up the regular payments to put that money into your savings account. It can be a wise idea to do this when you first get paid. This means that you will not be able to spend the money on other things and so you will make sure that it is saved each month. If you leave the payment until later there may be no money left to cover the payment and you may end up getting overdrawn. If it goes out early and you keep a check on the balance of your account, you will be able to track how much is in there and make sure that you do not spend too much money and get into this situation. Some people would rather just wait until the end of the month and see whether there is enough money left to save. Although it is wise to put any money that is left into a savings account, this may not be such a good idea. While you can see that you have money, you will be likely to spend it but if you can see that there is not much money in the account then you are less likely to spend and you will have those savings tucked away.

Compare all prices

If you want to have more money available to save then one thing that you can do is to compare prices. This means that you will need tocheck out everything before you buy it to make sure that you are not paying more than necessary. It can get to be something that is a habit and you will do automatically once you get used to it. It may seem to be a waste of time to compare everything and save a few pence here and there. However, if you do it with everything that you own then those small savings will all add up and make a difference. There are some things that will make a bigger difference such as switching utility companies, insurers, lenders and things like that but even savings in the supermarket can add up to make a difference as well.

Buy Less
It can make a difference if you cut down how much you are buying as well. If you can buy a few less things then the money that you would have paid out for them can be used to save. It can be hard buying less at times, but it is worth thinking about everything that you are buying and asking yourself whether you really need the items. You do not have to give up buying everything that you want, but if you can prioritise and only buy things you need and a few things that you want, then you will be able to save some money. There might be things that you buy that you hardly use. Perhaps you buy magazines and hardly read them or subscribe to television channels you do not watch. Think carefully about what you are buying and how much you really need.