Unsecured loan and credit card debt is known for their high interest rates. Yet, such debt is on the rise in the UK, and in December 2020 an UK adult owed on average close to £400. This is a quick guide on how to manage unsecured debt.
Repay the most expensive loans faster
At times it is inevitable. You find yourself in a situation where a consumer loan with a high interest rate is the best available option. Your car might have broken down and needs a costly repair. Without any savings set aside or the possibility to cover it with your next month’s salary, options are limited.
According to a survey by Greater London Authority, 40% of all Londoners have unsecured debt. Such debts, including credit cards and most personal loans, are known for their high interest rates.
That means that the quicker you can repay loans like these, the better. If the consumer loan you got to repair your car isn’t your only unsecured loan – target the one with the highest interest rate first. Make extra repayments whenever possible to get rid of the most expensive loans faster and minimize the total interest rate costs.
Savings account to the rescue!
Avoiding expensive, unsecured loans all together is of course the very best. To secure yourself against high interest rates, a savings account is the key. Commit yourself to set aside some money each month.
As your total savings increase, so does your ability to handle the next unforeseen cost without having to get a loan. No loan and no interest rates, means better possibilities to save even more.
Is it worth taking out a loan for?
As rewarding as it might seem to refurbish the living room, buy that designer handbag or order the long-desired trip abroad, these are hardly necessary expenses.
If you have to get an expensive loan to cover such costs, perhaps it is worth thinking twice. Have a close look at your personal finances, and remember that you should be able to handle unexpected expenses in the future to avoid accumulating even more debt.
Is it possible to put the dream on hold for some time? Meanwhile you can save up money to fulfil the dream without putting your personal finance at risk.
Paying on time
A simple advice in order to save money is to pay your instalments on time. By setting up direct debits in your bank, you won’t have to worry about missing your monthly payments or receiving penalties from the lender.
Good credit score – the key to favourable interest rates
Managing your personal finances well, will in turn impact your credit score positively. Not only will a good credit score make it easier for you to get a new loan when needed – chances are you will get it with a lower interest rate.
Getting an unsecured loan? Compare lenders to find the one
If you find yourself in a situation of needing an unsecured loan, don’t settle with the first loan offer you come across. By comparing loan quotes from various lenders, you are in the position to get the best interest rate. Receiving quotes from banks is made easy by online platforms such as lanfordeg.no, which is a major player in the Norwegian market. After filling in a simple form, you will be contacted by interested lenders, without any extra cost. There exists several similar platforms focusing specifically on the UK market.
Conclusion
Avoid unsecured loans if possible, but if you have to get one, choose the best one carefully before following this guide to repay it as soon as possible.
