The Good and Bad of Deferred Loans

Many personal loan deals feature an initial payment holiday whereby you don't have to start making payments on a loan for several months after receiving the advance. These are known as deferred loans, and are available both as unsecured loans and secured loans. Are they a feature worth looking for when you're in the market for a new loan?

The main benefit to them is that they can provide a bit of breathing space if your finances have got out of control. You can use the loan to pay off your pressing debts, and then use the deferment period to get your budget back in shape before the repayments start. For this reason, they are probably best suited to being used as part of a debt consolidation program.

It's not all good news though. The main catch to deferred loans is that interest is still mounting up during the payment holiday period, and so it's not exactly the free lunch that it at first might appear, and the true interest rate of the loan might end up being higher than the figure you signed up for.

So, should you take out such a loan? If you can use the deferment period productively to deal with your financial problems, then the answer could be yes. However, if the attraction of a payment holiday is that it's in some way something for nothing, then this isn't really the case and you should probably look elsewhere, such as for a loan with a lower rate and no deferred repayments.

Don't Take Out Payday Loans Lightly

It's not uncommon for people to be short of cash towards the end of the month, in the period between running out of spare cash and receiving your next paycheck. There are many ways that people tide themselves over this period, ranging from using a credit card for both purchases and cash withdrawals, or making use of a bank overdraft.

There is another option that you'll see advertised all over the web though: Payday Loans. In essence, these are simply short term loans for small amounts, which you clear when you next get paid. They are usually only taken out for a few days or a week or two.

Given the widespread advertising and publicity given to payday loans, you'd be forgiven for thinking that they were completely without drawbacks, but that's definitely not the case. Firstly, they're expensive. Secondly, they're often used as a last resort, when the other methods of accessing cash such as overdrafts have been used up and are no longer available.

Thirdly, it's usually a simple matter to renew your loan every month, which leads to a constant spiral of debt and interest charges, which is not something to recommend if you're already struggling financially.

This is not to say that payday loans are completely evil and should be avoided at all costs, but it makes sense to explore other ways of accessing ready cash before committing yourself to a loan which might last much longer than you anticipate.

Profiting From Your Credit Card Account

Despite their great convenience as a method of payment, credit cards have something of a reputation as a dangerous thing to have. One of their biggest benefits, the access to credit, is also one of their greatest drawbacks. It's all too easy to get into money problems by racking up debt that you'll struggle to pay off.

The can also be expensive, with some of the heftiest charges and interest rates you'll find in the financial services sector. But what if you could actually profit from using a credit card? What if you could take money out of the banks pockets and put it into yours?

We're talking, of course, about cashback credit cards, one of the latest fads to hit the credit industry. Although they've actually been around for quite some time, they are now being promoted more heavily as a desirable option.

Basically, when you use a cashback credit card, a small percentage of what you spend is credited back into your account. The numbers involved are small, usually around one per cent.

However, should you use the card a lot, for example for all your groceries and other essential purposes, then the cashback amount can soon mount up.

The essential thing to bear in mind though is that these cashback earnings will be dwarfed by any interest charges you accrue, and so in order to benefit you need to make sure that you clear your balance in full every month, and so avoid paying interest. Also make sure that there's no annual fee on the card, so that you're not paying anything at all to use the card - the money will be flowing all one way, from your credit card issuer to you!

Payday Loans : Sharking under any other name?

The internet is awash with sites promising a quick fix to your financial worries with a cash loan to see you through to your next payday. Originally a USA phenomenon, there are now more and more sites offering UK payday advances.

If you're struggling to make ends meet then such a loan could seem very attractive, but make sure you go into the deal with your eyes open.

Payday loans are expensive. VERY EXPENSIVE!

Depending on how much you borrow, and over how long, you could see ludicrously high APR figures of 1500% or even much more. This is because you're charged a flat fee of usually 20% of how much you borrow, even though you may be only borrowing for a week or two. Scale this over the 12 months that APR is calculated over and it's easy to see how these high figures come about.

The other major problem with a payday loan is that if you use it to finance day to day expenses rather than to meet a one-off bill, it's easy to become trapped into having to renew your loan every month, and pay a new set of fees every month too. This can rapidly make a bad financial situation even worse, and it's here that payday loans start to resemble sharks, mercilessly preying on the financially vulnerable.

Of course, there's nothing illegal about payday loans so long as you're made aware of the costs involved, so if you desperately need a fast cash injection then by all means apply.

Just don't use them as a band-aid to disguise the fact that your finances don't add up...

Balance Transfer Fees - the hidden danger

Most people are now aware of the fees being imposed by most credit card issuers for balance transfers, and while there are still cards available without a fee, a charge of 2.5% or thereabouts has become a fact of life.

Most cards with a transfer fee will cap the amount you have to pay at £50 or similar, with this figure hidden in the small print. Some cards, however, mention no upper limit - and if you don't notice this then you could be gouged quite painfully.

For example, transferring a £5,000 balance to a card charging a 3% fee with no upper limit would cost you £150, rather more than you might be expecting.

So, always check for a cap on charges before taking on a new card!

Is it worth switching energy supplier?

As energy prices continue to rise, it's becoming more and more important for people to minimise their gas and electricity costs. A popular method is to switch supplier in the hope of getting a better deal, and there are many sites out there which let you easily compare tariffs from the various companies.

But, as the price rises are caused by spiralling wholesale energy costs which affect all utility companies, will you really be able to get a cheaper deal?

The answer is still yes for many people, especially those who have never switched before.

When the industry was privatised and deregulated, most people simply stayed with whoever took over their regional supply for electricity, and stuck with British Gas as the name they knew.

These customers 'inherited' high prices as they were automatically placed on the most expensive tariff in most cases.

With increased competition these days, your current company is probably offering cheaper prices to new customers rather than rewarding loyalty, and so making the switch to a competitor can still save you up to £100 a year according to impartial estimates.

Unclaimed assets should go to charity

A government-backed report to be published tomorrow will call for possibly billions of pounds of unclaimed assets to be put towards charitable use.

Estimates of the value of unclaimed cash sitting in bank accounts vary, but most agree that the total runs into billions of pounds.

The report, complied by the Commission on Unclaimed Assets set up by chancellor Gordon Brown last year, says that a fund of at least £400m should be set up to help groups working to reduce poverty in some of the UK's poorest areas.

The money would be distributed by an independent 'social investment bank', and calls by banks for them to control distribution through their own foundations were rejected.

Under the proposals, only money that has been unclaimed for a period of 15 years or more will be used, and the original owners rights to reclaim the cash will still be preserved.