While every option on this list is a great way to get the extra money you need, they won’t all work for your unique circumstances. It’s important to carefully research what each method of funding involves, who’s eligible and whether there are any consequences further down the line. For some startups, bank loans will be a perfect choice, but other entrepreneurs might be more interested in grants for UK small businesses. Take some time to explore the below before making your final decision:
The UK government has a range of different loans and grants on offer for small businesses and startups. It can take some time to sift through all the options available, but there are all kinds of funding available to suit individual circumstances. For example, if you’ve been rejected by the bank for a small business loan, you may be eligible for something like a BCRS Business Loan. While this particular option is limited to the West Midlands, it’s worth reaching out to your local council to find out what’s on offer closer to home.
If you’re more interested in applying for a grant, you might be able to make use of start-up and small business growth grants. These are again usually location-specific, so be sure to check if your postcode is eligible for funding. Alternatively, if you’re interested in making your business more energy-efficient, you can look into applying for an Energy Efficiency Grant to support your project.
Grants can be incredibly competitive, which is why it’s worth paying close attention to specific criteria that could apply to your venture. You’ll be able to find grants for things like tourism boosting initiatives and businesses that support local artists.
If you’ve been unsuccessful in finding government funding in your area, traditional bank loans are always an option for startups in the UK. While many loans will require you to have a good credit rating, some lending schemes are specially geared up to support first-time business owners, which could make them more understanding in some circumstances.
Securing funding from a bank is typically an easier process than applying for a grant, but that doesn’t stop many entrepreneurs from being rejected. If your financial history is riddled with debt or missed payments on your mortgage, you can struggle to get the fresh start you want for your business. Consider taking out a secured loan if your bank doubts your ability to make payments on what you owe. This means that the bank will be able to claim your property or other assets as payment if you fail to uphold your end.
If you do want to pursue bank loans as an option, remember that there’s no one-size-fits-all solution. Before taking out a large, long-term loan, consider whether a bridging or short-term loan could suit your needs better.
If you’ve tried to secure funding from a High Street bank and aren’t eligible for government grants, there are alternative loans available for people with bad credit. Some of these providers will be available exclusively online, while others will have offices you can visit in person. Remember to be careful when taking out a bad credit loan, as interest can be much higher than on more traditional business loans. Companies like Capify have options available for entrepreneurs with a low credit score, while Liberis Finance may offer merchant cash advances to those in need of capital.
If you had your heart set on a grant but the government couldn’t deliver, don’t lose hope just yet. There are many other organisations that help budding entrepreneurs to get their ideas off the ground if they meet certain requirements. For example, The National Lottery is committed to funding startups and voluntary organisations all across the country. Often designed to help businesses looking to improve their communities, their grants are always worth a look.
Aimed at young people, The Prince’s Trust can be particularly helpful if you’re aged between 18 to 30 and are trying to start your own business. Not only can they help you financially, but they also offer advice and mentoring to support you on your journey. This is particularly valuable for people who are new to business and don’t have any previous skills or experience in starting their own company.
Remember that while you won’t have to pay grants back, you should always ask for a realistic amount in your application. Organisations expect you to fully support your request for a grant with in-depth reasoning and possibly even a copy of your long-term strategy and goals. It’s best to work this out yourself before putting your business forwards for consideration, otherwise, you could be setting yourself up for failure.
The process of getting the funds you need can vary and often depends on the kind of funding you’re looking for. Getting hold of a traditional bank loan will take considerably less time than applying for a specific grant from your local council. But the main thing that puts off entrepreneurs is getting rejected. It’s understandable to be disheartened after your applications aren’t accepted, but it’s important to keep going. Because there are so many options out there, eventually you’re bound to find something that works for you.
To increase your chances of getting accepted for a loan or grant, speak to an accountant or financial advisor. They can help you find the right opportunities and hone your application to perfection.
There are lots of different ways that fraudulent or unscrupulous mortgage lenders can prey on you and exploit you to gain financial advantage and in turn, leave you with financial difficulties. Predatory lending can involve loaning money based on your assets rather than your ability to repay the mortgage loan and encouraging you to frequently refinance so that excessive fees can be charged. It is important you spend time researching basic predatory loan tactics. When you understand them, you can take steps to avoid them. Common predatory loan tactics include:
One of the easiest ways of avoiding predatory lenders is to go with a reputable mortgage lender. You should compare mortgage rates to find the best deals. Never go with the first lender you encounter. To ensure you are protected and get the best mortgage rate, you need to spend time carefully scrutinising the offers and terms and conditions of each loan policy offered by the most trustworthy lenders.
A teaser rate is an unusually low introductory rate for a mortgage loan. It could be as low as 0%, making it an attractive offer for homebuyers wanting to get a low rate. Of course, the trick is once the introductory rate expires, a much more dramatic rate will be introduced in its place and you will end up paying much higher monthly repayments. To avoid teaser rates, always read through all terms and conditions carefully so you know exactly what you are signing up to.
Rather than going with trickster teaser rates, opt for a fixed-rate mortgage loan. With a fixed-rate loan, the interest rate remains the same throughout the loan’s term. While you also have the option of going with other types of mortgage loans, one thing is for sure: you must always be wary of and question high interest rates and fees that are way beyond the norm or reputable lenders. Refuse any additional services and payments that you do not need and cannot afford. A known tactic of predatory lenders is to charge very high interest rates to high-risk borrowers who are very likely to default and lose everything to the lender.
In addition to fixed-rate mortgage loans, there are various other reputable options you can choose from to best suit your personal financial circumstances. When you become knowledgeable about the different mortgage loan types available, you can make a more informed decision and ensure you do not fall victim to a predatory lender. So, learn what the difference is between a standard variable rate mortgage, a discounted rate mortgage, a capped rate mortgage, a tracker mortgage, an interest-only mortgage, a repayment mortgage, and more.
In the last year, around 9 million found themselves increasing their borrowing to tide them over for another month or two. Borrowing money from family and friends is often the most common form of borrowing and can often be interest-free and without any credit scoring or approval process. But it is important to understand the pros and cons since money between family and friends can compromise relationships.
Borrowing money from family and friends can often be a good idea when you need funds urgently. When unexpected circumstances do arise, family and friends may offer to support you out of goodwill and will often be able to help out quickly, providing you with whatever you need for the time being. Borrowing from family and friends also means you won’t be forced to pay back extra on your loan, as you may have to from a bank, payday lender or credit union.
Banks and other lending facilitates often charge ridiculously high-interest rates, meaning that you risk not being able to repay the money borrowed within the pre-arranged time frame, therefore paying additional interest and being trapped in a vicious cycle. This can then lead to excessive debt, meaning that it was not worth borrowing the original money in the first place.
Family and friends may also encourage you to pay them back what you owe quickly, as they don’t want to risk not having their money returned. Consequently, borrowing from those around you may entice you to repay the funds as you don’t want to be in debt to people you see on a regular basis, whereas borrowing from a bank or large institution might mean you feel less pressure to repay the money as you don’t know where it has come from.
Some families also lend their relatives money without the requirement that they ever pay it back. Many parents and grandparents set funds aside, saving money to pay for their children’s education, weddings, cars and house deposits. This can save their family from taking out loans with interest rates in the future and provide financial support through more difficult times.
Whilst family and friends may offer financial support in a time of need, it may not always be the best solution. Close relations may not demand that the money they have lent you should be repaid, leaving you feeling guilty and not wanting to ask them for financial aid in the future.
“If repayment terms are too loose,” explains John Gauthier of Hoopla Loans, “this can create an uncomfortable atmosphere, with people expecting repayment within a certain timeframe. Things can get tricky if you do not repay when expected or if you cannot repay at all, this makes things extremely awkward.
“Make no mistake, when it comes to money, things can get very tough even between close family members.”
Borrowing from those around you can also create animosity if you are embarrassed to explain your financial situation to them and ask for help. They can also refuse to lend money, leaving you with no option but to take out an alternative loan.
Besides the hospital bills, costs to repair damaged property, and the damages that you might have to pay if you’re found to be at fault, you also have to consider that these expenses will also significantly affect other areas of your finances. Your car insurance premiums are bound to increase, your injuries could prevent you from going back to work, and these sudden expenses could cause you to miss out on paying some bills and loans. After a car accident, financial recovery should be your top priority (along with your health). Here are some ways to maximise your recovery.
The most effective way to recover most of your finances is to file a personal injury claim. Legal experts have the knowledge, training, internal knowledge, and connections to help clients secure due compensation. They can also advise you on how to handle liability waivers, witness accounts, and how to interact with the other party. While you can indeed proceed with a personal injury claim without a lawyer, doing so would mean that you forgo your biggest advantage in the courtroom, even if you’re sure that the other party's at fault.
If you’re at fault and you’ve been made to pay damages, the best course of action is to reduce your expenses as best you can. This entails making significant lifestyle changes, but doing so will keep you from getting buried in debt, which is the last thing you need right now. Unsubscribe from any non-essential services that you use, and if your car was totalled, you may need to hold off from repairing it, and instead, commute, until you can financially recover.
If you have any running loans, it’s best to get in touch with your lenders and explain to them your situation. Most lenders are more than willing to negotiate the terms of your loan as they’d rather have small consistent payouts than missed payments from their clients. This way, your credit score won’t suffer from missing payments, and this will ensure that you still have loaning options open to you in the future.
Your car insurance is extremely useful during times like this. They can cover a portion of your medical expenses, pay for car repairs, pay for the cost of a rental vehicle, pay for lost wages, and they can even cover damages you’ve caused to the other party. Your car insurance is extremely important, and the full value of its premiums will be felt only when you need it most. Car accidents are more of an eventuality than a possibility, and the best remedy to a financial problem is to prepare for it. You should always have emergency funds for situations like these. Even if your funds don’t cover the expenses completely, it would still be a big help to have a financial buffer.
Unconventional personal loans like the old school personal loan allow you to borrow a certain amount of money at a fixed interest rate. You will have to pay back the amount along with the interest within a decided time period. The money that you have borrowed from the lender can then be used for any personal reason including purchases, medical use, car purchasing, home repairing, etc.
But what is the difference between a traditional personal loan and an unconventional personal loan? There are two key factors you should take into consideration. Firstly, the lenders for this unconventional loan are not the usual lenders, they are usually marketplace lenders, private lenders or lenders backed by the government. Secondly, different factors are taken into consideration for qualifying for this loan. These different factors make those people eligible for the loan who otherwise would not qualify for the traditional loans.
Unconventional loans have been specifically designed to cater to people who have low or moderate-income, and people who are unable to pay big down payments for a house. They are usually backed by the government and require no or very low down payment with low-interest value. Here are the different types of unconventional loans you can get:
This type of loan allows you to buy a house with a very low down payment. The interest rate offered is low compared to the conventional value but some other amounts have to be paid. This program asks you to pay an insurance premium as an upfront value and a monthly fee as well apart from the monthly instalment of the loan. The credit score limit for its eligibility is lower as compared to conventional loans.
This program has been specifically designed for Native Americans with no minimum limit of credit scores. They are asked to pay an upfront value along with a monthly insurance fee. The interest rate is very low making it an easier option for a loan.
For you to be eligible to get this loan you need to be in service. This loan has been designed for military personnel and members of the National Guard to build up a home for their family. This loan allows you to purchase a home without any down payment. The only money that you have to give is the VA funding fee. Usually, there is no minimum credit score limit to get the loan.
This loan has been designed for people who are on a moderate or low income and are looking forward to purchasing a home in a USDA designated rural area. With this loan, you do not have to pay any down payment and get complete financing at a reasonable interest. You have to pay a guarantee fee which includes an upfront value and monthly insurance fees.
An unconventional personal loan is the only way to get the best personal loan if you are not eligible to get a traditional bank loan. You can undergo situations in which you need money but you cannot qualify for conventional loans, in such situations unconventional is the best way to get a loan to suffice your needs.
Most of the unconventional loans come with no collateral. This means you do not have to have any personal belongings at risk to get the money. These unconventional loans come with no or very low down payment making it a very easy choice for the majority of low or moderate-income people. Having an unconventional loan can also improve your credit score as these unconventional lenders report about the loan activity to the credit bureaus which help to build up your loan history and improve your credit score.
The biggest drawback associated with unconventional loans is that you cannot receive a huge cash sum. With this loan, you will be able to meet only limited expenses. If you are looking forward to getting a big house or making a big purchase, then this loan is not for you. Most of the unconventional lenders are online which means you cannot establish any relationship with the lender which sometimes is necessary to discuss your issues and requirements. Moreover, in most cases, you are not guaranteed the lowest APR.
An unconventional personal loan is a great opportunity for those who are looking forward to borrowing money but cannot meet the criterion of the conventional lenders. There are many pros associated with it and will be very beneficial for you. However, all is not good for an unconventional loan and you might have to look into it to get the best loan out of it.
Moving into your 30s likely means being bombarded with new responsibilities like family dependency, loans, EMIs, insurance, kids, etc. And the list goes on. As such, it is important to be cautious and avoid any careless financial steps that could stun your financial growth and make you financially stagnant in the coming comings. Your 30s is the time to get smart with money. It might take some discipline to adopt sound financial habits, but they are sure to help you build your wealth. Here are some simple financial goals to pursue as you venture into your 30s.
Spending frivolously can keep you from pursuing your financial goals. Hence, create a budget and stick to it. The idea is to know where your money is flowing. Once you are aware of your spending habits, you can make sound financial decisions.
Even small expenditures like eating out or shopping can affect your financial plans in the long run. To stick to wise spending habits, document your expenses. Jot down how much you spend and what you spend your money on. Keep the receipts and check your expenses at the end of the month. Over time you will understand where your money is going and refrain from impulsive buying.
Student loans, automobile loans, and credit cards- all these expenses have high interest. As such, you should try to clear these debts as early as possible, or else the high interest rates and repayments will hover over your head, eating up your hard-earned money. Write your debts in ascending order, irrespective of their interest rate. Pay the minimum amount for all the debts. But for the smallest one, pay as much as possible every month. Once you clear your smaller debt, move ahead to the next ones.
Investing your money is one of the most sensible financial decisions you should make in your 30s. Educate yourself on all the investment options available at your disposal. Share markets, mutual funds, treasury bonds, etc, are some high-yielding investments. Experts suggest putting at least 70% of your savings into mutual funds, index funds, and stocks to let them grow.
Use insurance as a risk management tool. With products such as auto insurance, health insurance, home insurance, or life insurance, you save yourself from getting into a major financial crisis. If you can't bear the idea of filing paperwork or undergoing the long and tedious process of buying insurance, then don't fret. Salty, a high-growth insurance technology company , provides quick insurance when you need it the most.
Life can throw challenges anytime. It is only sensible to keep yourself financially ready to deal with the jolt. Create an emergency fund. Decide a minimum amount you should keep in it. Keep adding a set amount from your paycheck every month until you hit the base amount. Then, create incremental goals based on your expenses. According to experts, your emergency fund should be equal to 3 to 6 months of your living expenses.
While the 20s might seem too early to save for retirement, you should definitely begin saving in your 30s. Once you have paid off all your debts, start saving for retirement. Or better, don't wait to pay your debts. Even putting a small amount aside every month will make a big difference. While creating a budget, determine the amount you can spare to put in your retirement fund.
Being smart with money is something that everyone should learn before they turn 30. If you want to be wealthy and lead a safe and secure life, learn these financial lessons and adopt these simple habits to shoulder the full weight of adulthood. Make it a point to strive for these goals from the day you turn 30.
Not all entrepreneurs are good with numbers and keeping records, which is why it’s so crucial that they have a solid plan in place for money matters. Whether you’re thinking of starting a small business or want to improve the way you handle your books, these tips can help you to achieve more control over your financial situation.
If you’re still using spreadsheets to keep track of your finances, it might be time to invest in accounting software. This will help you to keep all your records secure while maintaining accurate information. There’s less room for human error thanks to the software’s ability to make calculations for you and you’ll never misplace an invoice or receipt again. What’s more, many types of accounting software will also help you to handle payroll and have better visibility over your cash flow.
When starting out it can be tempting to hold onto your money tightly, but this can often do your business more harm than good. While you need to be making a profit, it’s important that you reinvest your money in your business. This is crucial for future growth and will help you to increase your profits in the long term. Whether you’re thinking of hiring a marketing agency, upgrading your website or building an app, take some time to improve the services you’re offering to your customers to see your revenue increase.
Everyone knows they have to pay tax, but are you planning for it throughout the year? Many business owners only start thinking about tax as their deadline approaches, but this can put you in a tricky financial situation if your payment is bigger than you expected. Make sure you’re calculating tax as you go and setting aside funds that you know aren’t really yours. This way you can avoid any disasters at the end of the tax year that could potentially see your business folding before it’s even had a chance to grow.
People have different attitudes to loans, with some refusing them completely and others taking out too many. Loans aren’t all bad but you do have to choose them carefully. If you need an injection of cash to get your business off the ground, a loan could be well worth your time. But taking out loans with high interest rates could hurt you in the long run, especially if you’re not investing the money as wisely as you should.
Finally, insurance might be an extra expense in the short term, but it can save you thousands further down the line. Make sure you thoroughly research the types of insurance your business can benefit from to give yourself complete coverage. You want to be fully protected from potential lawsuits as well as natural disasters like floods and fires.
Depending on how much you owe, how high the interests are, what kind of loan it is, and your repayment history, your strategy for getting out of debt may change.
If you’ve fallen behind on payments, the situation may be more urgent. If interest rates are high, paying it off is more pressing to your financial health. When you develop a strategy for getting out of debt, it has to align with your unique financial situation.
Let’s start with credit card debt, one of the most common financial challenges in North America. When you’re carrying a high credit card balance, interest rates hold you back. With interest rates able to reach the 30 percent mark and 20 percent APR being common, it’s a remarkably expensive way to borrow money.
One of the best ways to deal with credit card debt is reducing those charges, which you can do through credit debt counselling. A certified Credit Counsellor from a non-profit credit counselling agency works with you to create a plan to pay back what you owe. That plan includes negotiating with the credit card companies for lower interest rates.
If you’re being contacted by debt collectors, the situation is urgent. Not only will you be getting calls at home and at work, but your credit rating has already taken a hit. If you’re dealing with debt collectors, try these tips:
Government revenue agencies have many tools at their disposal to collect funds that they are owed. They can:
Even if you don’t file your taxes, if you owe them money, the revenue agency will retroactively apply penalties once they learn how much you owe them.
Ignoring the problem is not helpful. Your best strategy for dealing with tax debt is approaching the revenue agency and working out a repayment plan. A credit counsellor from a non-profit Credit Counselling agency can help you budget your payment plan.
Low-interest debt is often seen as part of everyday life. It usually comes in the form of a mortgage, an auto loan, or a line of credit or HELOC (Home Equity Line of Credit). Many see these as non-urgent loans, and if you can invest for a higher return than the interest charges, you may want to prioritise saving over paying them down.
However, the lifetime cost of interest on a mortgage is sizeable, and it’s not to be ignored. The true cost depends on how much you borrowed and the interest rate, but if you borrowed $500,000 at an average of 3 percent over 25 years, you would pay over $210,000 in interest rates alone.
Even low-interest loans are worth paying off as quickly as possible, if not at the expense of high-interest loans.
Payday loans and other high cost loans are never shy of criticism. With MPs, such as Stella Creasy and public figures such as Archbishop Justin Welby regularly speaking out against the high cost loans and their high interest rates, often exceeding 1,000% APR.
For 8 million Britons that struggle with ongoing debt problems, payday loans do not necessarily provide a financial relief - and borrowing small sums of £300 or £500 can become a very costly process if debts are not paid on time.
In recent years, regulators and government officials have tried very hard to make payday lending extinct in the UK, or for the very least depowered. However, these micro loans serve as an anti-poverty measure for people who need to fill the gap until their next payday from work.
It started with an FCA meeting
Whilst payday was in its heyday in around 2013, the industry was worth an estimated £2 billion, served over 5 million customers per year and was served by over 200 UK lenders.
When the FCA became the regulator for the sector in 2015, it introduced new reforms such as a price cap, limits on fees and strict authorisation process to be able to trade. In a FCA meeting to other stakeholders in the loans industry, they highlighted their plans to have ‘only 4 payday lenders remaining in the industry’ - which at the time was deemed completely laughable and unrealistic, given the huge revenues and attention the industry was generating.
But, fast-forward 6 years later and this crazy concept is not so crazy any more.
Soon after the FCA took over, there was a huge drop off of lenders who simply could not make the business model profitable under the new price cap - and many were not able to meet the requirements of the FCA authorisation process.
The biggest impact has come from compensation claims and refunds from former customers. The FCA and Financial Ombudsman have allowed any customers who had trouble repaying their payday loans over the years. With high reclamation rates, individuals have been able to get reimbursements of just a few pounds to even several thousands of pounds, largely due to a lack of checks taken when their loan was approved. Perhaps they were already in debt, unemployed on benefits - or all of the above.
The result saw payday giant Wonga.com repay more than £500 million to previous customers which subsequently saw the company go into administration, swiftly followed by other huge players including The Money Shop, QuickQuid, WageDay Advance and many more.
Today, remarkably, there are only a handful of payday lenders left, but not enough for the product to go extinct.
What the experts have to say
Daniel Tannenbaum, who has over 10 years of working in the high cost loans industry and is currently the founder of Pheabs explains:
“It would be great to see payday loans becoming extinct, since these are high cost loans and whilst useful for some, others are far worse off after using them as a result. It would be great to see something else take its place.”
“People are unfortunately always going to be in debt and we have had alternatives for many years, whether it is credit unions or borrowing money from family or friends - but people prefer the quick and anonymity of payday loans.”
“I imagine for payday loans to be extinct, we need a really solid alternative. I would look towards the startup scene for this, since these are the more technology-driven companies who are more likely to raise millions upon millions of funding to really drive a new formidable product.”
“We already have some innovation in terms of salary finance, where you can draw money straight from your wages on demand and also some real growth in the peer to peer lending space. I think payday lending could become extinct if a handful of startups can facilitate a really strong alternative.”
Managing personal finances can be a challenge for everyone. Sadly, people dealing with a chronic illness often experience a unique and tougher set of financial challenges. Experts define a chronic disease as a long-lasting condition that keeps reoccurring. Conditions like pulmonary fibrosis and fibromyalgia can significantly slow down your operations, making day-to-day life extremely difficult. Such conditions can significantly hurt your finances.
Effectively managing money while facing a chronic illness will make things a little bit easier and allow you to focus on your health and recovery. Therefore, if you or your loved one suffer from a chronic condition, here are tips that can help you manage your finances.
Battling a chronic disease or injury is hard on its own, even without involving financial stress. Therefore, you should try to take care of your expenses and budget as soon as possible. By implementing proper organisational techniques, you can explore various prescriptions and insurance options for saving money in case of unforeseen health expenses. It would help if you supplemented your income so that it doesn't cause you too much stress.
Luckily, there are several ways you can generate income without the need to leave your home. One of them is a reverse mortgage. You can use a direct reverse mortgage lender to alleviate your current mortgage payments. This will come in handy, especially if your condition prevents you from working during your retirement years.
Sticking to a budget is vital for everyone, especially if you are battling a chronic illness. Such conditions increase expenditure due to additional wellness and medical expenses. As much as most people find it challenging to create and stick to a budget, it is very important that you do it. Create time in a day or week and come up with a reliable budget you can stick to.
Sticking to a budget is vital for everyone, especially if you are battling a chronic illness.
Remember to keep track of every expense, from basic needs to your medical expenses. Make sure you create a budget and a savings plan that fits your expenditure. If your condition needs an out-of-pocket prescription, you should include it in your budget and try to save money in other categories. Furthermore, if you have a massive hospital bill that overwhelms your budget, request to settle it in installments. Remember to modify your budget accordingly to match the alternating expenses. Be keen on saving as much money as possible.
Since chronic conditions are often very unpredictable, it is a good idea to have people who can help you stay focused. As much as you can get such help from family and friends who are good with finances, getting the services of a professional financial advisor can help you safeguard all your bases, considering planning and financial organisations have helped many people.
Give them a detailed history of your chronic condition and let them advise you accordingly. Sharing your health history is crucial because it is vital to factor your condition into long-term financial planning. Financial advisors can help you plan your healthcare savings and other related aspects. Besides, they help with budgeting for long-term care insurance and disability coverage. A financial advisor will help you understand the crucial services you need in the future and ensure you are managing your expenses appropriately.
One way to manage your finances is planning ahead. It is important to plan for things before you need them. One of the most reliable ways to do so is by getting all the insurance you might need, like disability, health, and home. Even though you might not have a large estate, it is nice to have things like living wills, trusts and directives squared away so that you won't have to worry about them in the future. This is just a precaution in case your health changes.
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Coming up with a plan for the future when battling a chronic condition is one of the best things you can do not only for your loved ones but also for yourself. It is not always exciting to do it but handling all your financial bases will reduce stress and give you the peace of mind you need. This can play an essential role in your recovery.
Managing money is something anyone can struggle with, and it is more challenging when you are battling a chronic condition. Battling such conditions doesn't mean there is no way you can effectively manage your finances. As discussed, there are several ways for you to do so. Implement these tips for a better financial situation.
When you're applying for a mortgage, auto loan, personal loan, or any other loan, you want to get the best outcome. However, your loan application may not go well all the time. It's because lenders consider a range of factors to ensure that they are extending the loan responsibly.
If you don't know what your lender is looking for, it can be more difficult for you to get approval. It would be best to acquaint yourself with the different factors that may significantly affect a lender's decision on your loan.
Before handing in your loan application, you may read through the following factors to help you get the most favourable response from your lender.
Lenders look at different factors when making loan decisions. While some of them are lenient when loaning the money, others can be remarkably strict. It's also worth noting that every lender is different and may place a greater weight on different factors. Many lenders look for trustworthy borrowers to minimise the risks of lending money.
Nevertheless, below are the factors that lenders usually consider when deciding on your loan.
Knowing them by heart can make the difference in qualifying for a loan and getting it at a good interest rate.
Typically, lenders will examine your credit report to know how you've managed your credit with other lenders in the past. Different relevant information that lenders are likely to see on your credit file, but your payment history will probably have a large bearing on your loan application.
Typically, lenders will examine your credit report to know how you've managed your credit with other lenders in the past.
If you didn't incur missed or late payments in your past credit accounts, they may consider you creditworthy. But your payment history, along with other details in your credit report, is basically encapsulated in a single number known as credit scores. Such scores may range between 350-850, and the higher they are, the better off your loan application will be.
It is important to remember that lenders prefer loaning money to borrowers who they have confidence will repay the loan as agreed. With that, they will certainly use your debt-to-income ratio (DTI) to determine how much you're earning and currently owing.
Although each lender has different requirements when it comes to your DTI ratio, they usually prefer a percentage that is not higher than 36%. If your monthly gross income is $5,000, your total monthly debts should not exceed $1,080. The lender's goal is to make sure you have enough income to make payments on new debt.
The amount you want to borrow and how you plan to use it can also affect a lender's decision on your loan application. Basically, it's one of the bases that lenders use to determine how much interest they will charge. If you borrow a larger amount, you are also likely to pay more interest on your loan. But a 20% down payment may help you get less interest.
Depending on the type of loan you'll borrow, lenders may also require you to put up collateral. But they usually do that when you're applying for a substantial amount. Lenders would want you to secure your loan so that they have a sort of protection if you miss payments. The loan purpose may also have some bearing on your application, depending on your lender.
The amount you want to borrow and how you plan to use it can also affect a lender's decision on your loan application.
The length of time you'll be paying the loan plays an important role in the lender's decision. Note that they will usually feel more comfortable lending you the loan for a shorter time. It's probably because you're less likely to default on the loan if you have to pay it sooner. But of course, it would mean a higher monthly payment on your part.
Lenders often take into account your liquid assets when you apply for loans like a mortgage, auto loan, or home equity loan. If they see that you have funds or assets that you can easily turn into cash, lenders may give you lower rates or better terms. It gives them reassurance that you have a financial cushion to fall back on quickly to make repayments even if you lose your job.
Besides the factors mentioned above, it's worth noting that the type of lender you choose can also make a big difference on your loan application. If you want to increase your chances of approval, you may have to go to a lender that best suits your needs and qualifications.
It would help to get yourself acquainted with the following types of lenders and see where you most fit in.
Traditional lenders typically refer to banks and credit unions. For such a long time, they were only the sources for loans and lines of credit. Among all the available commercial lending options, traditional lenders may offer the best terms. But the problem is, they are harder to qualify for since they have stricter application requirements.
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On the other hand, alternative lenders have been around for only a decade. They are also known as online lenders, and they are not subjected to the same level of regulation as banks and credit unions. They often have more lenient qualifications and much faster turnaround times than traditional ones. However, these lenders may charge higher interest rates.
There are various financing options everywhere. However, they are not all created equal. If you want to get the best terms possible, you must take the time to shop around different lenders and work on what they're looking for.
Suppose you wrote a check to a material supplier last week, and unfortunately, the accountant was out sick that day. Meanwhile, you forgot about the check, using your business checking account to make your everyday transactions. The check clears weeks later, and now you are hit with a hefty fee.
With overdraft protection, you could have avoided this hassle, and such a simple mistake wouldn’t have to derail your business operations.
Overdraft protection is a form of credit that the bank extends to business owners to protect them from hefty fees and assist with their operations' seamless running. When a business writes a check for more than the amount available in the account, this triggers overdraft fees which can snowball, costing the business many times over.
With overdraft protection, the bank will automatically "loan" the business money to cover the check's amount when the account does not have sufficient funds to cover it. Typically, the bank will then charge the business a fee of $35 for this service.
If your salesperson is taking a client out to dinner and there are insufficient funds in the account due to a bookkeeping error, overdraft protection will cover the transaction instead of having your company's card decline in front of your potential client or vendor.
Few things are more embarrassing than giving your business card information to a vendor only to have them call back and tell you that your card declined.
Small businesses often run on thin margins, and overdraft protection can cover you if you need extra cash in anticipation of income. Perhaps you have an invoice that you expect payment for, but the payment is still days away. You need to pay the utility bills or buy supplies, yet funds are low. Overdraft protection can kick in in an emergency, providing you with the cash you need.
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In another scenario, a heavy storm causes water to leak from the roof, leaving your showroom a wet mess. Paying for a contractor to come in and take care of the damage will cost you, but you will still have to pay your employees and your expenses. Overdraft protection will allow you to write the check to the contractor while still keeping your business running.
While many business owners use overdraft protection to keep their business afloat even when they are low on cash, it is not a magic pill. Each transaction carries a fee, and those fees can add up quickly if you use the service frequently. For instance, taking a client out to a $40 lunch can easily end up costing $75 once you factor in the cost of overdraft protection.
Some banks only charge the overdraft fee if the transaction is greater than $5, which saves you from being hit with $35 in extra fees for miscalculating a dollar here and there. Other banks have a daily limit of how much they will charge in fees, which is particularly helpful to small businesses.
Still other banks allow you to link a credit card or a savings account to your main account and will draw from those in the event of an overdraft. Those transactions' fees are usually much smaller, making them a better fit for businesses on a budget.
When it comes to protecting your business's finances, overdraft protection can give you a safety net in an emergency. Overdraft protection will grant you "leniency" for small accounting errors and provide you with the extra cushion you need in lean times. Many small businesses find overdraft protection a necessary part of overall financial management.
