5 Tips to Get Out of Debt

While credit can be useful, having debt can be stressful. Struggling to keep up with repayments can feel very much like walking the wrong way up an escalator. No matter how hard you try, it can lead to a feeling of getting nowhere fast.

But getting out of debt doesn’t have to be too hard. And taking control is the first step. We’ve outlined five simple ways to deal with your debts, before it becomes a bigger problem.

Back to Black

Knowledge is power, so getting out of the red and into a more viable financial position, means being really honest with yourself about your level of debt. It’s vital to sit down and work out how much you owe, and to whom. Remember that there are two different kinds of debt;

Priority Debts

These are debts that if left unpaid would risk you losing your house or criminalised. These would include mortgage or rent payments, TV Licence payments, secured loans, court fines, and council tax.

Non-Priority debts include utility bill payments, credit card debts, overdrafts, benefit overpayments.

It’s recommended that you always pay your priority debts first.

Budget

Once you have sorted out how much you owe, and to whom, you need to examine your income and outgoings. By analysing how much spare cash you have available after you have bought basics such as food, you can prioritise money left over for paying off your debts. If there is none left, concentrate on paying your priority debts first.

Maximise your Income

If possible, find ways to increase your earnings. If you have a spare room, consider taking on a lodger, (you are allowed a tax free income of £4, 250 per year from a lodger). Or consider extra part time work you could take on at weekends.

Credit Card Debt

Remember that interest rates on non-priority debts will continue to rack up, so if you have credit card debt consider applying for a 0% balance transfer card. If this isn’t possible due to bad credit, it’s advisable to write to credit card companies and explain that you are currently struggling. Include your budget sheet showing how much you are earning and what your essential outgoings are, and ask them if they would consider freezing the interest and accepting whatever you can afford in re-payments. Before you do this though, remember that this will be a big hit to your credit rating, and you will have to cut up your credit card.

Debt Consolidation Loans

Beware consolidating your existing debts. Although debt consolidation companies make things easier in terms of combining all your debts into one monthly re-payment, some companies will secure the debt against your home. APR rates can also be higher than your existing debts, so always check that you would actually be repaying less.

Ask the Experts

If you really don’t know where to start, and feel overwhelmed by debt, there are some helpful organisations available. Try the CCCS free debt remedy service at www.cccs.co.uk

How To Avoid Bad Credit Loans

Taking out a loan is both a serious decision – and a serious commitment. For most people though, borrowing money is a necessity at some point in their life. Credit makes funding large purchases or tiding us over until payday possible.

Unfortunately, the recession has made borrowing very difficult. The amount that traditional high street banks are prepared to release for credit purposes has become extremely thin. Loan companies, then, have filled a gap in the market, by enabling people who haven’t been successful in applying for a bank loan to access funds.

However, having a bad credit score makes applying for cash from a loan provider even more difficult. In fact, bad credit score, and barge pole, is the most likely reaction from most credit providers. As a result, companies providing bad credit loans have proliferated. This should be a good thing, but their terms can be harsh; some payday lenders charge an APR of as much as 4000%.
So how can you avoid bad credit loans in the first place?

Taking out a Loan

The most important first question to ask is, do I really need a loan? Take a look at your budget, and see if you can save for what you need first. If your cash just won’t stretch to saving, find out if you can borrow from friends or family…they might be able to help, as long as you commit to paying them back. Even better, they’re very unlikely to charge interest.

Improve your Credit Score

Lenders view your credit score as a record of your ability to repay a loan. So working on improving your score will enable you to access loans with more manageable interest rates. Firstly, check that your credit score is correct. You can order a copy of your credit report from one of the large credit record agencies such as Experian. If there are any mistakes, or if you have a good explanation for why you defaulted on a loan, you can have your report corrected or add a note explaining why there was a default.

And remember, if you take out a loan, ALWAYS repay it. That way, you will improve your creditworthiness.

Good Bad Credit Loans

The loans marketplace is a confusing one. There are hundreds of loan companies competing to offer a wide variety of loan products. For short term loans, there are numerous payday loan providers claiming to solve your cash-flow problems until payday. Often though, their charges and interest rates are not only very high, but contain hidden fees and charges. Always make sure that you know exactly what you will be re-paying, and don’t be tempted to ‘roll-over’ the debt for any longer than the original length of the loan. Any lender who is not clear and upfront about their fees should be approached with caution.

Finally, remember that short term loans can be a good idea to see you through a difficult time, but if you find yourself consistently struggling and in debt, finding a way to maximise your income is always the better long term solution.

Payday Loans – What to look out for

Consumer groups and professional debt advice services have long been concerned about payday lenders. Vulnerable groups of society, many of whom have bad credit, and are on very low incomes, are often forced to turn to payday lenders as a last resort. Currently, more than one million people in the UK are borrowing from payday lenders to cover everyday essentials such as food and household bills. This can lead to debt becoming a way of life.

Payday lenders offer short term loans for under £1000, normally over 31 days, with the option to roll-over the debt. So although an initial loan may be harmless, extending the loan increases the size and cost of the loan leading to a snowballing debt situation.

Payday loans are very simple to apply for. Having a poor credit record is no barrier, because defaulting means that payday lenders can profit from the hefty charges and fees applied to the loan. For this reason, payday lenders should be used only if absolutely necessary, and not as a long term money management solution.

However, if you have no choice, and must borrow from a payday lender, then it’s wise to choose the safest. We’ve set out a few things to consider, in order for you to make the safest choice:

Does the lender allow you to borrow regardless of your income and circumstances?

Any lender who allows you to borrow money without considering your financial situation or making credit checks is an irresponsible lender. This means they are unlikely to be sympathetic to any problems and simply want to exploit the situation. If you do have a bad credit record, try and find a lender who will allow those with poor credit to apply, by also looking at the individual’s circumstances in addition to the credit record.

Is there an early re-payment penalty?

Many lenders will charge a fee for an early repayment of the loan. Always make sure that a lender will allow you to save money by making an early repayment if possible.

Do they allow loan roll-overs?

Again, a lender who allows a borrower to extend their loan, is simply enabling the customer to ramp up their debt, whilst increasing the lenders own profits.

What is their policy on repayment defaults?

A responsible payday lender will ideally have a policy on how they deal with customer’s who aren’t able to repay. Check the small print for an indication of this. Some lenders will be sympathetic to customers who genuinely cannot repay on time, while others will sell the debt straight on to a collections agency.

Finally, it’s worth remembering that although APR rates are high, they are spread over the year and so don’t reflect the real costs of short term borrowing. So borrowing from a responsible short term lender to avoid being hit with a fee for non-payment of another debt can sometimes work out as the cheaper option. As always, do the maths first.

The Great Supplier Debate

In a small tech start up, you will need to outsource or buy in some areas of your business or technology platform. Unfortunately, it is necessary to get the agility and speed that is required in a start up environment. You can’t do everything in house, and frankly, in some cases, why would you want to?

At PiggyBank short term loans we use a multitude of different suppliers for different elements of our business. For example one supplier provides our payout mechanism, one supplier provides our hosting, one supplier provides our SMS send, and so on and so forth.

At PiggyBank we split our potential suppliers into three categories when we are discussing which solution is best for us:

Known entities

These are suppliers that we have first hand experience of using or working with.

Recommendations

These are suppliers that one of our peers have used, have had a positive experience working with and have given us an introduction

Google Roulette

These are suppliers that we have found on Google.

Most of our suppliers tend to come from the first two categories, but we have had the odd gem through Googling. Google is supposed to deliver the most relevant search results after all 😉

But how do you know that your chosen supplier is the most fit for purpose for your business before you sign up with them? Well, unfortunately you can never know for sure. But there are a few things that you can do to see if they will cut the mustard:

  • Check their customer service- call and email. If they are slow to respond to a sales lead, chances are they will be slow to respond when you have a problem
  • Have a face to face meeting- although it is old fashioned, there is a lot to be said by meeting people face to face. But the face to face can always be over skype if you want to keep it techie.
  • Demo their solution- if they will let you, try before you buy. Is it fit for your purpose?
  • Ask the community- if it’s a new or unknown solution, ask for opinions in related forums. If you don’t get any valuable feedback, ask yourself if it’s worth the risk/reward.
  • Ask current customers- always always always ask current customers of the business for reviews. It is a very valuable box ticking exercise
  • Don’t sign a long contract unless you have to- long contracts mean you cant be agile if the supplier doesn’t meet your expectations. Not good for a start up
  • Don’t make decisions based purely on commercials

5 Things You Didn’t Know About Payday Loans

The continued debate over payday loans has been reignited after a well-known payday loan company recently posted record profits for the past year. The argument over payday loans is divided between those who think they offer a good service, and those who believe their massive interest rates to be unacceptable. So what is the truth about payday loans?

Here are five facts about payday loans, to help you make up your mind.

Pay day loans are not currently recorded on your credit file as payday loan. However, there are moves afoot to potentially start adding them as a separate credit product, which could worsen your credit record.

Research shows that currently one million people in the UK rely on payday loans to meet their monthly household bills. The continued recession, lack of traditional high street bank credit facilities and deflated wages are forcing households to borrow more than ever.

The UK payday loan industry is worth an incredible one billion pounds, and is growing. The average amount borrowed on a payday loan is £200.

Payday lenders must operate under a new code of conduct which includes; giving clear and simple information on the amount borrowed and how much would be repaid. They must also assess customer’s financial situation more thoroughly, and notify customers in advance about payments due to be taken.

Payday loan customers can avoid charges on unpaid direct debits, bounced cheques or extending their overdraft limit, but can also be hit hard with charges if extending the loan.

The Ins and Outs Of Unsecured Loans

If you need to borrow a sum of money under £5,000 for a short time, then you will need to apply for an unsecured loan. These are short term loans with fixed rates of interest. A short term unsecured loan can be a payday loan, a P2P loan, or a personal loan. So what should you bear in mind if you are thinking about taking out an unsecured loan?

Definition of an Unsecured Loan

The loan is ‘unsecured’ meaning that you have not borrowed money against an asset such as a house. Defaulting on repayments means that you will not stand to lose your home, but you could be pursued by debt collection agencies, and will result in damage your credit record.

APR Rates

Unsecured loans will always attract a higher APR rate than a secured loan, especially if you have bad credit. However, while many unsecured loan lenders will assess your credit rating, there are also now a good number of lenders who do provide poor credit unsecured loans. If so, APR rates will be higher still, so it’s essential to shop around for the best deal.

Sensible Borrowing

Ideally, you should be looking to borrow only what you need for the shortest time possible. Otherwise, you are creating unnecessary debt, and racking up charges. Taking out an unsecured loan is a legal agreement, and gives you the ability to rebuild your credit record – so repay on time, clear the debt, and make sure you can afford it in the first place.

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

Guarantor Loans – What To Look Out For

Taking out a guarantor loan is becoming a popular option for those who suffer with bad credit scores. Assigning a willing friend or family member as a guarantor for a loan in your own name, assures lenders that the debt will be paid off by the guarantor in the event of a default. This allows them to offer lower interest rates in return for that security.

For anyone thinking of applying for a guarantor loan, these are some important points to be aware of.

Is the Loan secured against the Guarantors Home?

The Guarantor is responsible for the loan, so any possible default can put the guarantor’s home at risk and lead to them losing their home if the loan is secured against their house.

The Guarantor is locked into the loan

A guarantor has no way out of an agreement once it is finalised. It’s not possible to pull out, without the borrower paying off the debt in full, or refinancing by taking out another loan without the guarantors name on it. When you consider that a guarantor loan can have a five year term, there is quite a lot of potential for things to go wrong.

Alternatives to Guarantor Loans

A Guarantor loan is a huge commitment for both the guarantor and the borrower. If possible, instead consider a short term loan. It’s always best to borrow as little as possible, for the shortest time. Neither will you jeopardise your friendship or family’s security if you cannot repay.

Customer Service for Startups

I’ve worked in customer facing roles constantly throughout my career. From small agencies, to large multinational corporations and in industries ranging from pharmaceuticals, to digital, to finance.

Regardless of the industry or company, one thing that has remained consistent is the importance of providing the highest possible level of customer service.

It’s something I strongly believe in. After all, I’m the first to complain if I don’t have a good customer experience, normally sharing the information with friends and work colleagues. It’s easy to see how word of mouth reputation exists and with most brands now adopting some form of social media presence, there’s no escaping people taking this information online. On a personal level I’ve noticed an increase of people tweeting brands, publicly complaining or praising their experience.

PiggyBank being in Beta is giving us an opportunity to really talk and dedicate time to understand each and every one of our customers – We like to share information here at PiggyBank so here’s what we’ve learnt so far about customer service for startups:

Live your brand and your voicePiggyBank was always intended to be “friendly finance”, it’s part of our philosophy. No matter what sort of day we’re having at PiggyBank HQ, whether we’ve run out of coffee or you’ve caught us at 8:30 on a Monday morning– we’ll make sure we’re being as friendly and as helpful as possible

Every customer is unique – It sounds like a cliché, but it’s human nature to make assumptions based on previous experience. We’re always trying to take each PiggyBank loan customer who’s contacting us and understand their circumstances, not make assumptions based on other customers. We like to think this is helping us treat our customers fairly which is all part of our responsible lending and collections process

Don’t be afraid of making mistakes – We’re not saying we get our customer communications right every time, but we’ll always learn a valuable lesson for next time. Being a lean start up is all about making changes based on experience. We won’t stop changing until we’re the best we possibly can be.

Alternatives to Payday Loans

Massive APR rates, as well as high charges, have given payday loans a bad press and rightly so. Penalties for defaulting, increasing debts by rolling-over loans to the next month, and lack of responsible lending, leave customers caught in a never-ending payday loan trap. When you need funds in an emergency though, and friends or family can’t help, it’s often necessary to borrow – but where from? You might want to consider a different type of bad credit loan.

Guarantor Loan

These enable you to borrow up to £5000 without any credit checks, as long as you have someone willing to guarantee the loan. However, there are pitfalls with this. You could jeopardise your friendship or a family relationship if you cannot meet a payment, and even lose them their home. Only consider as a very last resort.

Banks

Banks will sometimes let you sign up for an authorised overdraft. If not, and you have a credit card, consider using this before taking out a payday loan. As long as you pay it off at the end of the month you will be paying less than on a payday loan APR.

Peer to Peer (P2P) Lending

A fresh approach to lending, P2P loans can offer short term funding for many purposes. The simple idea behind is to connect borrowers with lenders, and provide credit as well as savings income. Some P2P loan providers consider applicants with poor credit, so do your research first.

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

Payday Loans Vs Guarantor Loans

Payday loan companies have been quick to flourish in the recent financial climate. But unfair fees and high interest rates have attracted a lot of criticism. Although payday loan companies have recently promised to be more transparent about their fees and charges, it is wise to remain wary. But what alternatives are out there out there if you need a short term loan to tide you over until payday?

Guarantor Loans and P2P Lending

There have been two recent innovations in the financial marketplace The P2P marketplace can offer short term loans on more favourable terms than other loan providers, as well as providing a good return for savers. Offering lower APR rates for borrowing, transparent costs, and the ‘feel-good’ factor of social lending, peer-to-peer lending has led to a surge of interest from borrowers and lenders alike.

Similarly, Guarantor Loans provide a new way for a borrower with bad credit to access a loan. Having bad credit severely limits your borrowing options. Often, it’s impossible to get credit, or crippling APR rates can exacerbate existing financial problems. And having a guarantor as security against the loan will enable you to both borrow and repair a poor credit score. The guarantor does have to be financially viable, and willing to take over responsibility for the loan if necessary. However, as competition grows, the criteria for the guarantor of an unsecured loan is loosening, and they do not necessarily now have to be homeowners.

So, as traditional financial institutions continue to squeeze credit, it’s worth remembering that there are now more diverse options available than ever before.

  • If possible, avoid payday loans – these are a costly way of borrowing money.
  • Find a lender who doesn’t charge hidden fees
  • Use a lender who will allow you to pay your loan back early if you are able – that way you will avoid paying the full interest rate.