Producing a Budget

A budget is an estimation of savings and expenditure. You might think that producing a budget might not be the most exciting thing, but it is one of the most vital things. In other words, though you might not have fun making a budget, you have to do it f you are to keep your finances in check. However, if you have not produced a budget before, doing so for the first time might be a little challenging, unless you have some help along the way. The first thing you need to know about producing a budget is that you need to provide as much information as you can. At the end of the whole process, your budget should reflect how much money you have coming and from where, and how much you are spending and on what. Below are a few steps to help you produce a good budget.

  • The first step to producing a budget is to gather information. Collect all your financial statements and this includes investment accounts, bank statements and utility bills. Collect any statements that show how you have been spending your money recently and those that reflect any payments or money coming in. The whole essence of gathering all these statements is to come up with an average of how much money comes in a month and how much you spend in the same month.
  • The second thing that you need to do is to record all the information that you have gathered. Record all your income sources as well as monthly expenses. If you get your income from a monthly check, make sure you reflect how much money is on the check and deduct any taxes or fines. In case you are self employed or have another source of income, make sure that this is also reflected. Your list of expenses should include anything that you intend to spend your money on, for example car insurance, mortgage, utilities and groceries among others.
  • It is recommended that you break your expenses into the categories of fixed and variable. Fixed expenses are those that stay the same every month, while variable expenses are those that keep fluctuating. Fixed expenses are usually constant and non adjustable, whole variable expenses can always be cut down.
  • The last step to producing a budget is to total all your expenses and income. In case your income is lower than the expenses, you will need to make a few changes.

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Steps to Managing Your Finances

Your money is important and it will often dictate how you live your life. You will not a lecture room or class where you are taught to manage your finances. However, as you go through life, you will have to learn how to manage your finances, especially if you are to afford most of the things that you need in life. Research shows that over fifty percent of people in the world do not have retirement plans and end up not enjoying their retirement after all. If you want to enjoy your life, or make sure that you are ready for expected and unexpected circumstances, you need to learn how to manage your finances. Hopefully, the steps below will help you to do just that;

  • The best and most recommended way of managing your finances is by making a budget. A budget will help you to understand how much money you have coming in and how much you are spending. A budget will help you identify those things that you should not even be spending any money on and which areas are best for making savings.
  • The best thing for you to do in the beginning is to just keep track of all your expenses for at least a month. Just stay alert and study how you use your money. Make sure that you do not limit yourself during the monitoring month, but try to keep things as normal as possible. Save any receipts that you make or receive so as to have a written record.
  • After the first month, or the monitoring month, make sure that you take stock of all the money that you have spent and how much you have received. It is often best that you keep the two categories separate. For example under the income category, you could put salary, while under the expense category; you could put rent or household bills. Just make sure that whatever you record is accurate and do not try to hike or reduce any of the prices or costs.
  • The key to managing your finances is honesty. Be honest about how much you make, how much you save and how much you spend. It is only when you paint a truthful picture that you will be able to make any necessary adjustments.

What is Asset Finance

Asset finance is a form of loan whose main aim is to purchase equipment or upgrade already existing assets. It is mainly used by companies to overcome the challenge of having to raise new capital for purchasing new assets. Asset finance can be used for purchasing cars, plant machinery and office equipment among others. You might be wondering why these companies would not just go for options like hire purchase or finance leases. The reason why most companies prefer asset finance is that it is a secured loan. In other words, the loan is provided under an understanding that the assets purchased with the loan money are put up as collateral for the said loan. The best thing about asset finance is that the loan cannot be recalled while the agreement still stands. For you to understand asset finance, and how it differs from other loans; it is vital that we look at its benefits.

  • Asset finance makes it possible for businesses to purchase the assets they need without touching their cash flow. In other words, the money used for purchasing the much needed assets does not directly come out of the business’s pocket, thus protecting its cash flow.
  • Asset finance makes it possible for businesses to only lease the assets they need, especially if the assets are only needed for a short time. This way, businesses do not need to purchase assets that they only need to use for a limited time.
  • Asset finance also makes it possible for equipment or assets to be purchased both domestically and internationally. If the required assets are only available on the international market, asset finance will make such a purchase possible.
  • If the business needs to upgrade an already existing asset, asset finance eliminates the need to sell such asset at a second hand price. In other words, instead of selling your old assets at a low price, asset financing makes it possible for you to upgrade such assets to the required level.

There are a number of asset financing options that you can choose, for example, hire purchase, finance lease, asset refinance, import leasing and vendor finance among others. However, before choosing any one of these options, it is recommended that you look at their benefits and short comings.

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What are Short Term Loans

Simply put, a short term loan is a loan that has a short repayment period. It is usually a loan that you can get fast, but also need to repay it after a very short period of time. A short term loan can have a maturity period of as little as ninety days. It is this kind of loan that usually puts pressure on debtors, since its maturity period is usually shorter than that of ordinary loans. Short term loans are also usually referred to as payday loans.

If you have failed to procure a loan for your business through the legitimate channels of going to the bank, you can still qualify for a short term loans. Banks too provide these forms of loans, but they usually do so for trusted or long term customers. In most cases, when you need a short term loan, you might need to go to a loan shark. Truth be told, short term loans have been around for a long time, but the recent economic environment has made them popular. Today, instead of having to wait for a month or go through various credit checks to get your loan, you could get your loan in as little as twenty four hours. The best thing about payday loans is that they have a short approval time. All you have to do is fill in your application and your loan could be approved in a very short time. You no longer need to wait for money, since it is delivered into your bank account in a short time. Short term loans are definitely a good way for you to pay for unexpected expenses or take care of emergencies.

With a short term loan, it does not matter whether or not your credit is good. It is for this reason that many people refer to these loans as bad credit loans. Short term loan lenders do not really care about the status of your credit. This is, therefore, a very good way for you to get a quick loan, even if you would ordinarily not qualify for such a loan because of your bad credit.

What are Secured Loans

When you hear people talking about loans, chances are that they are really talking about secured loans. Most loans today are secured loans, which is why it is vital that you understand what they are, especially if you are considering getting a loan. Simply put, a secured loan is where the borrower puts up some property as collateral for a loan. The property put up really depends on the amount of the loan money, but in most cases it is a car, house or land among others. Once the property has been put up as collateral, it becomes what is referred to as a secured debt that is owed to the creditor of the loan. With secured loans, once the debtor or borrower fails to pay the loan amount per the agreed upon time, the creditor can then take possession of the asset put up as collateral. The creditor reserves the right to sell that property in order to recover some or the entire loan amount. In case the sale of the property does not yield the entire loan amount, the creditor can then take it to the courts to recover the balance.

Secured loans are usually preferred by both borrowers and creditors, because of the added level of security. Creditors prefer them because they give them a sense of security, knowing that in case the debtor fails to raise the loan amount, they always have a fallback position, or another way to recover their money. On the other hand, debtors prefer secured loans because they generally attract low interest rates. The whole rationale behind interest rates is for the creditor to have some form of security until the loan is fully paid off. Since the creditor already has security in the form of collateral, there is really no need for high interest rates.

There are numerous types of secured loans, including mortgage loan, non recourse loan, repossession and foreclosure among others. A mortgage is a secured loan because the house is always put up as collateral. Once you default on your mortgage payments, the bank reserved the right to take possession of your house.

In a nutshell, a secured loan is the safest loan, because it gives the creditor some form of security and gives the debtor an added advantage.

Is Peer to Peer lending the answer to all of our problems? Part 2

Last week we briefly described peer to peer lending and the potential benefits it can have on the UK economy in helping plug the gap left by the Banks. A recent study conducted by Nesta outlined that peer to peer lending has the potential to deliver over £12bn in business lending annually. In addition to this 75% of the lenders who were surveyed outlined that they would be increasing their lending over the next 12 months.

Despite this there are a number of people who fear this new phenomena and question whether or not peer to peer lending is safe. One question that always comes up is the fact that as a lender your savings are not guaranteed and that your savings can be lost. The Financial services compensation scheme, which will guarantee saver’s money which is deposited with a bank for up to £85,000. It also covers Investments for up to £50,000,however peer to peer lending is not covered by this.

Whilst it it true that not every business is going to be a success and not every individual will be able to repay their loan, if entrepreneurs and individuals do not have access to finance then our economy will not grow at the pace necessary to reduce the unemployment rate and deliver the jobs it so desperately needs.

The public sector has lost 640,000 employees since 2009 and a further 340,000 are set to be lost by the next general election. These lost jobs will need to be filled by the private sector and in order to create jobs, small and medium sized businesses need to be able to grow. Whilst the major banks do provide the vast majority of funding, they cannot possibly be expected to provide 100% of all the loans needed to help companies grow their businesses and create jobs.

Peer to peer companies have to ensure that the money that they lend out is given under the strictest conditions. If lender’s have bad experiences they will tell their colleagues and peers and in turn new lenders will be turned away and then their businesses will fail. Zopa, the first peer to peer lender in the UK for individuals has lent out over £280 million in loans, has a default rate of 0.78%. Ratesetter another peer to peer lender who have lent out over £67 million in loans have a default rate of 0.37%. Funding Circle who only lend to small business, has lent out over £97 million in loans, has a slightly higher default rate at 1.6%.

Peer to peer lending tend to reject about 85% of all applications received and the two of the largest lenders Zopa and Ratesetter and developed a fund which borrowers pay in to, to offset defaults and ensure lenders at a minimum would get their money back if an individual or business failed to repay their loan. In addition short term lenders can lend to multiple borrowers and therefore spread the risk of the money lent out. PiggyBank, another peer to peer lender spreads a borrowers money into £50 chunks and as a result reduces the risk of borrowers losing their money.

One thing that is for sure is that the status quo needs to change because the way things were died when the world was turned upside down by the global recession.

Next week we will delve a little deeper into some of the lenders in the market, what their criteria is and why some of the largest banks in the UK are starting to enter into the peer to peer lending market.

Is Peer to Peer lending the answer to all of our problems?

Peer to peer lending is where individuals lend their money directly to people looking to borrow money for personal or business reasons. It is a new form of lending that has arisen partly because the traditional forms of finance have deteriorated since the Global recession began in 2008. The Big banks are no longer lending at the rates they once were to business owners and individuals. On top of this, savers are no longer getting the high returns they were five years ago.

Peer to peer lenders can get returns of between about 2% and 12%, which is massive compared to the major banks, who tend to offer on average, between 1% and 3% for savings accounts and cash ISA’s.

The majority of peer to peer lenders offer business loans, and if used correctly, will provide a major boost to the UK economy, as the Big five banks who provide 92% of all business loans, are still not lending enough to drive the growth that the UK economy needs to bounce back as a major force in the financial world. The Bank of England said that in the last 4 years lending to small businesses has fallen by 15.4%.

The majority of the UK may be living dangerously close to the red, but there are still a large amount of individuals who have the resources to be able to lend to small businesses and individuals. The most recent Sunday Times rich list (2013), showed that the 1,000 richest people in Britain and Ireland share a wealth of £450bn.

In addition it is estimated that around 47% of Britons are now saving. The majority of these savers will be getting a very low return on their savings compared to peer to peer lenders.

More needs to be done to promote these short term lenders and the courageous Individuals helping bring Britain back from the brink of Bankruptcy and into prosperity. Since this phenomenon started in 2005 over £300 million has been lent to businesses and individuals.

Like any investment there are risks involved with peer to peer lending. Unlike other financial institutions, Lenders money are not guaranteed by the Financial services compensation scheme, which means Money could be lost. We will explain next week why this should not be a deterrent for those who are serious about savings.

We will also discuss the different lenders in the market and what they have to offer and how to best make an informed decision about if peer to peer lending is for you.

Being a Responsible Lender…

At PiggyBank, we pride ourselves on being a responsible lender. With a fair amount of negativity in the current press regarding payday loans, we are writing this entry to show that there are positives to payday loans, as long as they are used in the right way.

At the very beginning of the application process, prior to being approved for a loan, we conduct a fair amount of checks on each individual. Once those checks are approved, we can then consider lending to the customer. One thing we ask for from our customers is honesty. We are here to give people a helping hand, and aim to build relationships with our customers based upon trust. This means we are happy to lend on multiple occasions, and the customer knows they can come back to us if they need any further help at a later date.

As a responsible lender, we always encourage any applicants to borrow only what they need. This helps to ensure that although we are here to help, we are only lending what our customers can realistically afford to pay back over a short period of time. We strongly advise that our loans are not to be thought of as a long term fixture, and if you are struggling financially a payday loan should not be an option, as it is not a solution.

Debt Management – The easiest option is not always the best

In today’s climate more and more people are struggling with finance and do not know where to turn. Despite the fact that PiggyBank are a responsible short term loans bad credit direct lender that completes the relevant credit and affordability checks, a few of our customers unfortunately experience a change in circumstance, meaning they struggle to make the repayments.

Ultimately a borrower is responsible for their own finance and can not place the blame on the lender but we are all human and people make mistakes. Life is not always straight forward and things can change which are beyond our own control.

When these mistakes are made, people do need help and do not know where to turn. That is where the debt management companies step in. With their colourful websites and promises that they can not always keep to, it is just as easy to be drawn in by them as it is the shiny credit cards and the easy access overdrafts. Remember, loans for really bad credit will have a high interest rate, so will cost more to repay.

Debt management companies do a very good job, they take the stress away from the client, they negotiate to freeze interest and charges and deal with the distribution of the monthly payment each month. However the fine print is not always made clear and their promises may be empty.

Once they have completed an income and expenditure, they then work out a how much disposable income is available each month. This is what will be paid to the debt management company. Whilst that seems wonderful as the out goings are no longer a stretch, some times it is not made clear that they may keep the first two payments that are made to them, as well as retaining a monthly management fee of generally around 17.5%. On top of this there may also be a charge on the anniversary of the plan being set up.

What they may also not make clear is during the set up period the debt may be spiraling out of control. If payments are not made to the creditors interest and charges may still be added and the accounts could be defaulted. This may result in legal action being taken against the borrower before the debt management plan has begun.

By the law the creditor does not have to agree to any offer made by the debt management company, they do however have to cash payment and can not prevent the borrower from becoming debt free.

The borrower could take responsibility for their own finance instead of passing it over to a third party. As well as saving money by not paying fees they could work with their creditors directly, which may save them money on interest and charges. Under the Office of Fair Trading guidelines as long as financial hardship can be proven, which could be as simple as providing creditors with a financial statement and a bank statement to back this up, creditors have to work with with them.

By dealing direct with creditors, a plan could be but in place a lot quicker! No charges or set up fees would need to be paid and the borrower could find them self debt free a lot sooner. It may be scary having to admit to creditors that they are struggling but the feeling of freedom when they are not being contacted by their creditors and ultimately the feeling of becoming debt free in a short amount of time would be well worth it.

We all make mistakes but it’s about how you deal with them that really counts. At PiggyBank we are committed to ensuring that our customers can comfortably repay their loan, if a customer encounters an issue which means they will struggle to make repayment we will work with you find a solution.

However if a borrower felt like there is no other option but to enter into debt management they should look into the following non profit debt management companies:

www.stepchange.org
www.payplan.com

They can provide impartial advice as they are there to help and not profit from people who are struggling.

What is Asset finance?

Asset finance is an arrangement that allows a company to manage its personnel, machinery and office equipment. Asset finance is becoming increasing popular as many companies are now using this method to expand their company infrastructure. The financial asset of a company can either be tangible or intangible; it can also have the following characteristics:

1. They are easy to liquidate. The assets should be easily converted to cash when the need arises. It is common for governments to liquidate assets to raise capital for a project or support the country’s economy; likewise, a company can liquidate its assets to pay debts or support a new idea.

2. The asset must generate compensation. An asset is referred to as performing asset when the asset has the potential of generating high compensation.

Benefits of Asset Finance

  • It saves capitals: The cost of buying new equipment can sometimes make it impossible for the company to invest into another project. Asset finance offers the company an opportunity to implement a new business idea and gives room for new opportunities.
  • Makes budget management easy: it gives the company room for planning and budget as it brings in regular income over a fixed period. This brings value to the business.
  • It gives room for new opportunities.
  • It is flexible: Different arrangements can be made. This flexibility makes it useful to the company.
  • Helps in maintaining other credits: You can consider finance assets and at the same time consider a loan for a bank. Both can operate simultaneously.

An asset does not only refer to machinery or equipment; it also extends to any item or person that is valuable, useful, can give value and be an advantage to a business. Asset finance is a handy tool that can be used when a business is in financial trouble.

There are many benefits that can be derived when one uses asset finance option. These benefits include that it gives the business an opportunity to save capital and invests into other ideas and new opportunities. It gives the business room to grow.

For a payday loan or a short term loan, contact us for more information.