The top myths about borrowing money

The top myths about borrowing money (and how to stop your money concerns)

The act of borrowing capital for it to be paid back with interest pre-dates even the common usage of money as a currency. Over the years borrowing, and the forces that govern it, have changed, and evolved.

Today, the lending industry is growing with institutions of all types, from breakdown recovery providers, to supermarkets.

With so many options available within such a crowded marketplace, certain myths have begun to circulate, myths that can be damaging to the people taken in by them. In this piece, we are going to highlight what we believe to be the top few, extract the truth from them, and hopefully leave you in a better position to eliminate your money concerns.

So, let’s kick things off with a classic…

Myth 1: If borrowing money, take the most that is offered to you

You need £500 for some emergency repairs on your car. You do your homework and find the loan company that fits your needs, fill out the form, and minutes later get a message telling you you’re eligible for a £2,500 loan. Happy days, eh? Now, not only can you get the repairs done, but you can have those chrome alloys fitted that you’ve had your eye on. You might even just have enough left over for a big night out to celebrate.

Easy there tiger. As tempting as it can be to get a little over-excited when seeing more numbers than you expected, it doesn’t mean you should take them all. Remember, loans companies tell you what you can afford to borrow, not what you should.

The bigger the loan, the higher the repayments. With this in mind, when deciding that you need a loan to finance any aspect of your life, do some number-crunching, work out exactly what you can afford to borrow; and stick to that figure.

 Myth 2: Paying for everything yourself will ensure a good credit rating

Before approving a loan, lenders look at the borrowing history of a would-be customer. They need to ascertain how reliable they are when it comes to dealing with money, and how much of a risk a customer presents in terms of meeting repayments.

If no history can be found on a credit file because the individual in question pays for everything in cash, then it is difficult for a lender to determine whether it’s a risk worth taking.

Compared with using credit, or defaulting on repayments, using cash often presents as a superior option. However if you have only ever paid for everything outright and have no history of responsible credit use, then it will be make it harder to obtain credit should the situation arise.

Myth 3: A poor credit score can never be rebuilt

All a credit report really is, is a history of all your borrowing. A record of all credit opened in your name dating back no further than six years. Defaults, hard credit searches, and charges such as CCJs may all inflict damage on scores. Even if an account is closed, it isn’t wiped from your record, at least not for a long time.

But it’s not all bad news. It is possible to rebuild your rating by paying on time and showing yourself to be a good borrower.

Away from issues surrounding the pros and cons of saving, and of credit checks and paper over plastic, some of the most stubborn and prevalent myths surround independent loans companies. Up next are some of the most enduring…

Myth 4: Taking out another loan will just make my debt situation worse.

A lingering myth, and one which on the face of it looks obvious. Surely, if I’m struggling to meet multiple loan repayments, taking out another loan is nothing short of madness.

It’s a myth and allow us to explain why. By taking out a consolidation loan, all your existing debts are effectively paid off. This may mean no more letters from providers, no more trying to remember which days repayments are taken, and no more paying back multiple interest charges. The consolidation loan combines everything into one payment, taken on one day of the month, and at an interest rate that may be lower than any of those attached to the repayments you’ve been making.

And a little-known bonus is that if you manage to make your monthly payments and pay off the loan on time, it will actually end up improving your credit score. However, this may involve extending the lending terms of the loan increasing the total amount you may pay over time

Whatever you do though, don’t be tempted to seek loans from a secured loans provider, because we all know…

Myth 5: Secured loans providers insert hidden fees and conditions

There’s an entirely erroneous assumption that secured loans providers add fees and make changes to the original terms of loans after they have been approved. This is simply not true.

The most likely reason this myth persists, is that very few people bother to read every term and condition prior to taking out a loan. The reality is the UK loans industry is highly regulated. Lenders – all lenders – must include fees clearly and terms and conditions before a loan is approved, making it impossible for lenders to add fees and conditions once a loan has been taken.

The afore mentioned myths relating to secured loans providers work in unison to preserve another that will look familiar…

Myth 6: Secured loans providers are for people with serious financial problems 

The smattering of bad publicity surrounding secured loans providers has followed a theme that such loans are the preserve of the destitute. *sigh* Not true. These loans are used for a variety of reasons like home improvements, or when credit scores mean the computer has said “no”. These can happen to anyone, regardless of income.

Just because you didn’t have access to your money immediately when an emergency expense arose. Or you just needed a little help because the emergency expense wasn’t budgeted for; doesn’t automatically mean you are struggling financially. It’s something most people have experienced at some point in their lives.

Evolution Money recently discovered that a whopping 86% of all recent funded loans were either for Debt Consolidation, or Home Improvements. Both hardly being the preserve of those on the bread line.

Should an emergency expense arise, advice from well-meaning third parties will play to the tune of our final myth…

Myth 7: You are better off without a loan from a secured loan provider

Some secured loan lenders may market their products aggressively. Then again, what industry isn’t pushing the benefits of their commodities with a degree of belligerence these days?

The point is demand for these loans continues to increase globally, not just in the UK. People, the world over, are turning secured loans providers, and are finding them quite useful, especially in emergency situations.

This myth has gathered pace because some secured loan provider customers have fallen foul of astronomic interest charges leveraged by a handful of rogue lenders (Source: https://www.theguardian.com/money/2007/sep/16/debt). As pointed out earlier, this is not typical. In fact, secured loans providers’ products are among the best, if not the best, types of short and long-term loans available today if they are taken wisely, used wisely, and repaid on time.

12 Ways to Save Money This Year

Christmas and New Year are an expensive time for most, after paying out for gifts, food, nights out with friends and visits to see family on top of your regular outgoings. It’s little wonder many of us are looking to save money in 2020 and cut our monthly expenses. Check out these 12 ways to help save money in 2020.

Use Public Transport

Okay so trains and other forms of public transport may not be as cheap and cheerful these days, but neither is paying to tax, M.O.T, insure, run and park a car. Using public transport can be a great way to save money in the New Year as well as possibly being the more eco-friendly option.

If you’re living in or around a bustling city, it’s likely you may save money by using public transport.

Buying your train ticket weekly, monthly, seasonal or even annually can prove to be a lot more cost-effective then single journeys, and there’s also plenty of hidden fares and split tickets up for grabs if you know where to look.

Consolidate your debt

If you’re paying off a debt, or even numerous debts, then you may be paying out a substantial amount of your income each month. Take control of your finances by consolidating your debt into one manageable monthly repayment and potentially save money each month.

It can also help you to gain a better understanding of your income and monthly outgoings, as you’ll no longer be juggling numerous due dates, lending terms and conditions. For a wide range of borrowing options, please take a look at our debt consolidation loans, ranging from £5,000 to £50,000, to see how Evolution Money can help you.

De-clutter, upcycle and sell your possessions

After the chaos of the winter holidays, it’s time to refresh, get your home organised, and of course, save. Why not spend some time de-cluttering, it’s a free activity at least, and sort through your possessions deciding what to keep, what to donate, and what to sell in order to bring in some extra cash.

You may even discover old clothes, like that jacket you only wore once to a wedding two years ago, and decide to re-wear or up-cycle. This can potentially help you to avoid the Early year sales and hoards of shoppers and actually save this month.

Shop Around for Services

Another way to save money and then benefit all year round is to make sure you shop around for your services. Do you have the best deal on utilities and household bills?

Could you be saving on your insurance?

Prices can vary wildly for the same service so you may be surprised that comparing service providers and swapping for a cheaper deal could help you to save hundreds of pounds over the year by cutting the cost of your monthly outgoings.

 To potentially save on your broadband, media and mobile phone bills, contact your current providers and ask for a new tariff, you never know what you may be offered. Or, wait to renew your contract for a better deal with another provider. Sim-only contracts can often work out cheaper than paying for the handset too.

Install energy-efficient light bulbs

To save money on your household electricity bill this year, why not swap out your old lightbulbs for energy-efficient ones?  LED light bulbs only use around 5 watts of power and work just as well, if not better, than filament bulbs that use around 40 watts. Upgrading even one bulb in your home could save you potentially hundreds over a lifetime as well as saving energy.

Try a Smart Meter

Try a smart meter to keep on top of your monthly electric and gas usage and costly outgoings. There’s plenty of advantages to using a smart meter over traditional meters including automatic meter readings and an in-home display so you can see how much energy you’re using and how much it costs you in real-time. That means no more estimated bills, and you’ll only pay for the energy you’ve used.

Ideal for when you’re trying to trim your outgoings and monthly bills. Start the year off the right way and save money on gas or electricity and minimise your use of appliances that are costly to run.

 Unplug electrical devices when not in use

If you’re in the habit of keeping electrical devices plugged in around the house that you aren’t using, then 2020 is the time to stop and start saving some money.

It can sometimes prove difficult to keep on top of, especially in a house full of teenagers and numerous gaming consoles and gadgets. However, unplugging electrical devices when not in use could potentially save some money on your electricity bill.

Take a look at your Direct Debits

The start of the year is an ideal time to assess your outgoings and take a good look at your direct debts, memberships and subscriptions. You could save hundreds of pounds a year.

Whether it’s an expensive gym membership that you don’t make the most of, online streaming subscriptions you could live without, dating services you signed up to and lost interest in or free trials you forgot to cancel.

Plan Inexpensive Days Out

After splashing out on the festivities over the Christmas holidays, you’re likely looking to save on days out and activities in the new year. There’s no need to hide away though as there’s plenty of inexpensive days out and free activities.

Keep your eye on the community groups who often offer subsidised classes and activity days and free events for a range of ages. Why not swap a day at the zoo for a day at the park with a packed lunch? Check out the local leisure centre for a cheap swimming session or enquire at a volunteer group to find out how you could get involved.

Cook Homemade Meals

This tip for saving money in 2020 may be one of the more obvious ones and likely a new year’s resolution from a health perspective. We know there are many health and cost benefits to cooking homemade meals, and not living off ready meals or takeaways. There’s also the added benefit that taking last night’s leftovers into work for lunch will also stop you buying food every day and may end up saving you a considerable amount of money over the year.

Preparation is the key to tasty, cheaper homemade meals that will refrain you from eating out or ordering a takeaway. You’ll also be doing your bit to reduce waste.

Buy Items in Bulk when possible

When out shopping, buying items in bulk can be a great way of saving money in the long-term. When possible, take advantage of bulk buy offers on non-perishable and necessity items such as salt, rice and shampoo. Remember to only buy items that you need or would buy ordinarily.

You can also save money by choosing to buy supermarkets own-brand or basic products rather than the more expensive, well-known brands. Often there’s little difference in quality, only price, so there’s no reason for not changing your shopping habits and giving them a go.

Take Advantage of Coupons & Promotional Offers

You may be saving this month, but that doesn’t mean you can’t treat yourself once or twice. Take advantage of coupons and promotional offers in order to stretch your money as far as possible.

Plenty of restaurants offer up to 50% off at the start of the year to encourage customers to dine, and there’s plenty of coupons and discount codes available online for a wide range of days out and experiences. Check out voucher websites for before making any purchases.