Cheap loans
Obtaining a cheap loan
We receive a lot of calls and emails from the public asking; "I need a cheap loan to clear my debt?".
The staff at Money Advice Direct are always keen to provide an alternative way of dealing with debt problems rather than getting a loan, even if the loan is a cheap loan.
When you get a loan the borrower initially receives an amount of money from the lender, which they pay back, usually in regular installments, to the lender. A loan is generally provided at a cost, referred to as interest on the debt. A cheap loan is referred to as 'cheap' because the interest rate charged in considered to be lower than other loans or credit available.
Advice On Loans
If you want to borrow money to help you buy something, such as furniture, a car or a holiday, there are a number of lenders all willing to lend you the money - it’s never been easier to get a loan. But bear in mind you will have to pay interest on what you borrow which means that you’ll pay back more than you actually borrowed.
Firms lending money to customers must be licensed by the Office of Fair Trading (OFT) under The Consumer Credit Act 1974. The Act requires certain credit and hire agreements to be set out in a particular way and to contain certain information.
A loan is an amount of money borrowed for a set period with an agreed repayment schedule. The repayment amount will depend on the size and duration of the loan and the rate of interest.
Loans are generally most suitable for paying for assets, like vehicles and computers, for start-up capital and for other cases where the amount of money you need is not going to change.
The terms and price of loans vary by provider and may be negotiable.
Consolidating your debts with a cheap loan
If you're thinking about taking out a single loan to pay off all your existing debts, make sure you're not simply taking on more debt. Check that the terms of the loan - interest rates and length of the loan, for example - aren't too harsh. Be very careful about taking out a loan secured on your house as it will put your home at risk.
It's always advisable to seek independent advice before taking out any kind of loan. Please call 0800 074 6918 for more information.
Advantages of Cheap Loans
- You are guaranteed the money for a certain period - generally three to ten years - unless you breach the loan conditions.
- Loans can be tied to the lifetime of the equipment or other asset you're borrowing the money to pay for.
- You may be able to negotiate a repayment holiday, meaning that you only pay interest for a certain amount of time whilst repayments on the capital are frozen.
- While you are obliged to pay interest on your loan, you do not have to give the lender a percentage of your profits or a share in your company.
- Interest rates may be fixed for the term so you will know the level of repayments throughout the life of the loan.
- There may be an arrangement fee that is only paid at the start of the loan but not throughout its life.
Disadvantages of Cheap Loans
- Most loans have strict terms and conditions.
- They're not very flexible - you could be paying interest on funds you're not using.
- You could have trouble making monthly repayments if your customers don't pay promptly, causing cashflow problems.
- In some cases loans are secured against the assets of the business or your personal possessions, including your home. The interest rates for secured loans may be lower than for unsecured ones, but your assets or home could be at risk if you cannot make the repayments.
- It is not a good idea to take out a loan for ongoing expenses. Expenses are best funded from the cash received from sales, possibly with an overdraft as backup.
If you're struggling with debts, they may seem impossible to manage. However, there are ways to get out of debt, no matter how bad the situation seems. And there's plenty of confidential and non-judgemental advice available to help you to get debt free (subject to terms and conditions).
Money Advice Direct offers a 24 hour freephone, confidential and ethical debt help over the phone for people in England, Scotland, Wales and Northern Ireland. You can call our freephone helpline on 0800 074 6918 24 hours all year round, including bank holidays.
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IVA's
The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.
In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]
What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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DANGER
Due to the tremendous demand for debt consolidation services the United Kingdom is now overloaded with debt management companies that contain misleading information. [more...]