Is it Wise to Spend Money When Interest Rates are low?

It can be confusing knowing when is the best time to spend our money or when to make big and expensive purchases. Sometimes we get no choice as we need to buy something but if we do have some time that we can wait then it can be hard to know when might be the best time to buy. It can be worth thinking about how you are going to buy the item and this will help you to decide when might be a good time.

Purchasing with savings
If you have some savings and you are wondering whether to spend them, then interest rates could be quite relevant. If interest rates are high, then you can make a lot of money by leaving your money in a savings account. You will be getting a return on that money each month or year and it could be worth keeping it in the savings account so that you can gain more money on it. If the interest rate is low then you are not gaining much by keeping it in the savings account. You might be better off spending the money and enjoying it rather than just earning a very small amount of interest on it. It is wise to keep some money for emergencies but you may not need as much as you have saved. So low interest rates could encourage you to spend your savings as they are not really doing much for you in the bank.

Purchasing with a loan
If interest rates are low then borrowing is much cheaper. This means that getting a loan will be cheaper than if interest rates are high. When they are high it could be wise to wait for them to come down a bit before you borrow money and then it will be cheaper. You should still be careful though. Make sure that you know how much you will be expected to repay each month and think about whether you will be able to afford it. If you are not sure then look at your bank statements and see how much money you have left each month and whether this would be enough to cover the repayments. If not then look at what you are buying and whether you can cut down in order to afford it. It would be wise to write yourself out a budget if this is the case.

Of course, interest rates can go up and down and so unless you get a fixed rate loan or a fixed rate savings account, the amount that you are paying in interest could vary. So, there is always an element of the unknown in the equation where you know what rates are currently but you do not know what they will be in the future. You may be able to make a guess based on predictions or on trends but it is not a perfect science. You may feel that if they are low and have been for a while then they are more likely to go up than down and vice versa. There are quite a few ways that you can try to predict what might happen which could be useful. However, it is wise to be prepared for an unpredicted change in rates and think about what you might do in this situation. It is a good idea to make sure that you only take on a loan, for example, if you know that you will be able to easily make the repayments. Then if rates go up and payments get dearer you will still be able to afford them. It is really good to make sure of this as you never know what might happen and you will then be prepared and you will not need to worry. Also, if you have plenty of money available to make the repayments it means if prices go up you will still be able to afford things. Even if you a have a fixed rate loan and therefore your repayments will not change, it is still worth making sure you will easily be able to repay them so that you have some extra money available in case you need it.

You also want to make sure that you think about whether this is the right time for your personally to get a loan. Think about your job security, for example and whether your income is likely to remain the same for the duration of the loan. Consider your spending as well and whether this might change significantly too. It is a good idea to think about whether there might be any family changes, work changes or whether you might want to move house when you are imagining the future. The longer the term of the loan, the more important it is to think about what might happen in the future.

Will Getting a Credit Card Improve my Credit Score?

Our credit score is something that lenders, letting agents and even some employers will look at in order to make decisions about us. If they judge that we do not have a good credit record then this may mean that we will not be able to borrow money or get leant money at high rates. We may also get turned down for certain private rental houses and may not even be able to secure a job. This means that having a good credit score can be really important. There are things that we can do to try to improve our credit score if we feel that it will help us. Some people suggest that getting a credit card can do this and so it is worth considering whether this would work for you.

How does credit scoring work?
In the UK there are three companies that you can contact in order to look at your credit report. This holds information about your financial history and will allow anyone who looks at it to see whether they feel they would be prepared to lend to you or whatever. If they see that you have had unpaid debts in the past or you have them now, they may be reluctant as they may feel that you will might be likely to do the same again and not make payments or repayments. So it is all based on risk and so if you show that you are not a good risk because you have missed debt repayments, have lots of debt or have a CCJ for unpaid debt then you will not get a good score. However, if you make regular payments and do not have any unpaid debt then your credit score will be higher. Scores are not always calculated the same way; it can depend on who is looking at your record but the things that you can do to improve your score are pretty much the same.

How can it be improved?
The first place to start is to have a look at your credit record. You can do this for free through several different companies. You then should check to make sure that the information on it is correct. If it is not then get in touch with the companies that claim you owe them money to ask then to put it right.

If the information is correct then you will be able to see whether there are any things on there which look like they could do with improving. It could be that you have a large debt which you could do with paying off or that you owed money in the past that you have now paid off. If it is a debt that is a problem then you can get working on repaying it. However, if it is something from the past then things have been resolved now and you may just have to wait until enough time has passed for it to be removed from your credit record. However, it might be that you have never had credit or do not have your name on enough bills to actually have much of a credit record. If you are not signed up to direct debits, a rental agreement and have no credit card or anything like that then there is not much for anyone to go by. This is where people might look to borrowing to improve their credit score.

How can a credit card improve it?
There are some credit cards which are specifically targeted to those who wish to improve their credit score. They are happy to let those how do not have such a good credit record have one. These could be worth considering but also see if you can get a regular credit card as these are likely to be cheaper. The important thing to do with a credit card though is to repay the full balance each month. With a credit card you are allowed to just repay the interest on the card; and possibly a bot more; or to repay any higher amount including everything that is owed. If you pay it all off then you will have no charges for your borrowing. The more you are able to pay off the less the cost of the borrowing will be. It is therefore best to pay it all off and if you want to improve your credit record then you will need to be able to do this. This means that you need to be careful when you have a card that you only spend on it if you can afford to repay it. It can be wise to use it to pay for groceries, fuel and things like that and then set up a direct debit to pay the card off when you get paid. Keep the money that you would normally pay on these things in your current account and it will be there ready to pay off the card when necessary.