Lo and Behold, Should I Be Borrowing?

Written By ipink edy on Friday, August 2, 2013 | 6:25 PM


I remember getting my first loan. It was to pay for a then little-known experimental procedure called moustacheplasty. My friends warned me not to, but I just knew that I'd love the way the wind would feel through the bristles (which, as an impulsive young lady of 19 years was quite a thrill I can tell you!). I managed to get a good deal on my loan, and had it repaid in no time. It ended up as a good investment really; I now get so much work from circuses and village fetes that the operation has paid for itself many times over.

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But I was lucky, with the mustache but more so with the loan. I did it all wrong but somehow managed to land on my feet. However, if you don't want to leave selecting a loan to the vagaries of chance read on for some helpful hints...

Do you need a loan?

It sounds like a simple thing to say but do you actually need a loan? Maybe a credit card might be more appropriate if you can get an interest-free deal and can be disciplined enough to repay what you borrowed in a short space of time. So-called payday loans (a specialist type of loan where the money you borrow normally has to be repaid within a month) charge a fantastical amount of interest and should only be considered as a very last resort once you have exhausted all other avenues.

Committing yourself to any borrowing requires careful thought. Is this something you can save for? Is it necessary to make the purchase right now? (In my case I had the impatience of youth and just wanted my own mustache as soon as I could get it glued onto my face.) Once you have questioned your motives and have decided that you are still looking to get a loan, check out these key points:

The very first thing you should do is itemize your income (wages, mustache-related royalties etc.) and your outgoings (mortgage, council tax, utilities, subscription to The International Mustachio Gazette). Itemize everything and be realistic - if you think you only spend £250 on groceries each month, but your previous bank statements show you spend £350, use £350! Once you have itemized all your outgoings and worked out how much you have left, then you will have a better idea how much you can afford on a monthly basis. When taking out any loan, be it an unsecured loan, secured loan, mortgage or mustache finance, it is always best to set the term for as short a time as your budget allows. This will mean that your monthly repayments are higher, but over the term of the loan you will actually pay less as you are not getting charged as much interest. Secured vs. Unsecured. You might be forgiven for thinking that the difference between a secured and an unsecured loan is that a secured loan gives you more security. Not so. A secured loan will be attached (secured) to a piece of property, normally your house or car, less commonly your mustache. If you fail to keep up with your repayments the lender can sell your property to get their money back. Secured loans tend to be available for larger amounts, over longer terms. If you are considering a secured loan speak to your mortgage lender as well, they may be able to off you a further advance which might cost a lot less! When you are looking for a loan, be aware that the typical advertised APR rate isn't necessarily the rate that you will actually get. It is usually the case that the rate you pay is linked to your credit score, as well as to the amount you wish to borrow. Don't settle for the quote your bank gives you. When I was considering moustacheplasty I looked at several surgeons, and then chose the one that had the best moustache. It is similar with loans; rates vary considerably so don't be lazy and settle for it, do some leg work to make sure you get the best deal. When you take out a loan a lot of lenders will allow you to defer your first payment for a couple of months. Some of them will sneakily include the deferred payment on a quote - watch out for this as it's a way lenders can squeeze more money out of you. When deferring the first payment on a loan, interest continues to be charged, increasing the overall amount you end up paying back. Think about whether you actually need to do this to alleviate the immediate pressure on your finances (you might want to pay for Christmas for instance or your annual car insurance premium or an excursion to the 2010 Mustache of the Year tournament in Bratislava). If you can afford the payment it is best to pay sooner, not having to pay for a couple of months might feel good, but you are only postponing the inevitable! Early Repayment. Many lenders will charge you if you repay your loan before the end of the agreed term. If you think you might be able to repay early, you should be ready for this charge. Even better though, when selecting your loan, why not find one that doesn't have an early repayment charge at all! Fees. There may be a fee payable for setting up the loan so, as ever, check the terms before you sign up - some lenders will "helpfully" offer to add this to your loan (they're all heart aren't they? But remember any fees added will be charged interest as well which will increase the overall cost). You might be offered a same day transfer of the loan into your bank account - there might be a charge for this. Payment Protection Insurance (PPI). This type of cover has had a lot of bad press over the last few months. Basically PPI will ensure the monthly repayments are met on your loan if you are unable to make them due to sickness, an accident or unemployment. The two key things to remember are: don't settle for the quote your lender gives you (shop around or see a broker) and think carefully about whether the cover is actually necessary. Payment Protection Insurance may be worthwhile, particularly if things are tight or you are reliant on a single income. In these situations, it may be more appropriate to try to cover all of your outgoings: mortgage, utilities, insurance premiums etc. with a larger policy, normally called Accident, Sickness and Unemployment cover. Lastly, it is always a good idea to check your credit rating before you make an application. Remember that any declined loan applications go onto your credit file as well, so don't blindly go to every lender making an application - it will become less likely that you will get a loan. If you have a poor credit history in this time of tightening criteria, you would be better to seek professional guidance on your options. Remember you can also always get online and compare the best loans available to you before speaking to anyone.

Well, these tips should have given you all you need to go forth and prosper. As for me, well, I am currently in rehearsals for my bid to become the first female Freddie Mercury tribute act in Nepal. Coming to a theatre near Kathmandu soon.


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