General

Is it wise to take out a Business Loan?

When you run your own business or if you are starting a business there are always a lot of potential costs that need funding. Sometimes there are so many things that you could potentially spend money on you feel you need to get a loan to afford them. Other times you have to get a loan as there is no way you can afford to pay for even the essentials without one.

Deciding on whether to get a loan can sometimes be an easy decision. If you need to expand or to start up and have nowhere else to get the money then a loan will probably be your only option. However, it can be worth thinking hard about whether there are alternatives such as Emu.co.uk. You may be able to get crowd funding or some other sort of help which could be worth looking in to before you borrow money.

As with any loan it is always wise to make sure that the items you are buying with the loan are completely necessary. Make sure that there is not a cheaper alternative to those things as well. Compare prices and make sure that you only borrow exactly what you need. Every penny that you borrow will need to be paid back with interest so only borrow the exact amount you have to and nothing more.

If your business can grow, but only if you invest then this could be a reason for considering a loan. If you have the money in business savings then it would be much wiser to use that instead, but many businesses do have money put by. You will obviously need to put together a business plan for the bank, to convince them that lending to you is a good idea. Before you show them though, show other people. Not just people that you work with but friends and family as well. Discuss with them why you want the money, what you plan to do with it, how you think it will generate you income and why you think it will be worth it. People who are outside of the industry may see things from a different point of view to you and this will enable you to think it through from a different angle. It should help you to check whether you really are making the right decision.

You should also take a look at your competitors and what they are doing. See whether you think that you will still be able to compete with them of whether what you plan to do with the money will help you to get ahead. See whether they have done something similar and whether it seems to have benefitted them or not.

Think about the economy as well and how you think that might change your customers and their behaviour. It is not easy to predict this at all, but you can look at recent trends and consider what changes, such as a change in interest rates, might have. It may change spending patterns and behaviour which could impact your sales. If there is a risk that sales may go down then this could make it difficult to make the loan repayments and it may mean that you took the loan out at the wrong time. Consider what might happen if there is a turn for the worse or a turn for the better with regards to the demand for your goods and services and how you might cope with that. It is worth considering whether there is a reason to think that you might need money in the future and that if you have this loan now, you may not be able to get another one and so you may struggle.

You also need to think about the cost of the repayments. Find out how much they will be and calculate whether the business will be able to afford them. Consider what might happen if the interest rate rises and you have to pay more for each repayment and whether you will be able to cope with that. Think about what might happen if you cannot make the repayment and how you will cope.

You may feel that your business will not be able to continue without a loan, but it may not be able to continue with a loan either. It may be that you need to rethink what you are doing in your business so that you can increase your income without having to borrow money. Decide whether it is the right time to take this sort of risk and if you think that your business as well as you personally are ready to take on this sort of risk. Take a long time to consider it as it is a big decision with wide reaching consequences.

Car Loans

When Should you Take a Car Loan From a Dealer?

Many people that buy cars tend to use a loan to pay for them. Whether you are buying a new or second hand car, the cost can be very big and this means that you often will not have the money to pay for it and therefore need to borrow. Many people choose to avoid borrowing from the dealer directly as they think they will be more expensive, but there are times when it is worth considering doing this.

Some dealers will offer 0% finance. This means that you will be able to pay for the car slowly, over a few years perhaps, but you will not have to pay interest in order to do this. This can seem really good, but it is worth checking a few things first. Find out what the arrangement fees are for the loan, as there may be extra charges which could still make this an expensive way to borrow the money. It is also worth noting that if they can afford to offer this deal it may mean that they have increased the prices of their vehicles to cover the finance costs and risks. This means that the specific dealer may actually be more expensive, for all buyers than others. Although you will not be able to compare prices exactly as cars are not identical, you should be able to look at their prices for certain types, ages and models of car and see how that compares to other dealers and work out whether you think they are too expensive. Consider whether it might be better to go to a dealer that does not offer this finance deal, pay less for your car and get a loan elsewhere to pay for it. You will need to research the costs of borrowing from alternative places in order to work this out though.

It may be easier to secure a loan with a dealer. They will want you to buy the car form them and so they may not have strict criteria as other lenders. You may find that even if your credit score is not that high, you may be more able to get a loan from them, than another lender. This will of course depend on the specific dealer and what guidelines they use to determine who to lend to.

If your alternative for borrowing is really expensive then it will make sense to borrow from the dealer. If you have to turn to a credit card or overdraft to get the money, then it is likely that you will be paying a lot more back in fees, charges and interest with these than you would for a loan. It is worth comparing the rates though, just to check whether this actually is the case or not.

If you are in a hurry to get a new car, perhaps yours has just stopped working and you need a new one to travel to work, then you will need to get it immediately. Organising finance from anywhere but the dealer could take so long that you may find you cannot get the vehicle in time, if you wait. It is not nice being rushed into a decision like this, not only a quick car purchase but also a quick loan, but if you are desperate then you may have to. However, even if this happens it may be possible to pay the loan off early to save yourself a bit of money. Work out how much this will cost as there are likely to be fees in order to go ahead with this. Compare the costs of keeping the loan form the dealer, including early repayment fees with the costs of using a different loan to pay it off and decide whether you think it is worth doing or not.

Borrowing money is always a decision that should be thought about for a long time. You need to consider whether what you are buying is worth the cost of the borrowing as well as whether you think you will be able to make all of the repayments on time. Then you need to make sure that you borrow money the cheapest way possible. It is a lot to consider and it can become confusing and it can be easy to be talked into an unfavourable deal. If you find it all a bit too difficult then ask a financial advisor to help you. They will be able to look at all of the available options and show you which is the cheapest so that you can more easily decide which is going to be the best one for you. Although you will have to pay them for their help, it can be very much better than signing up to the wring loan and paying massively over the odds for it, far more than the cost of the financial advisor.

Lending

Should You Lend Money to your Friends?

It is lovely to be seen as a generous person. We like people who are generous in many ways, but being generous with money can be problematic, particularly if you lend money to friends. So it is not always the right thing to do and you should think hard before you do it.

If you have a friend who is short of money and you have money to spare it can be tempting to lend them some money. It feels like the right thing to do, that you should look after your friend and let them have money at a time when they need it and you have a bit extra. Then when they have some extra money again, they will be able to pay you back and everything will be square again. They may even be able to return the favour if you need money. However, there are times when things do not turn out quite so well and so it is worth thinking hard about whether to lend money or not.

There could firstly be a problem if they cannot pay you back. Their financial situation may get worse and they may not have the available money to give you back what you lent them even after getting paid. This might be okay for a while, if you are still well off, but if you get in a situation where you need extra money, but there is none because you have lent it to your friend, then this could be a problem. You may have to borrow money yourself then and perhaps if you have to get a loan and pay interest on it, you may regret lending them the money. You may even feel like demanding it back and insisting they get a loan instead and this would not be good for your relationship with them. They may even forget that they borrowed it, if a lot of time goes by and you may want it back and they claim they do not owe it to you.

You may think that when they repay the loan that they should give you some interest. Perhaps you discussed this when you lent it or just assumed it. Either way, if they think this is not fair, do not remember or do not agree then this could cause problems between you. Even if they repay you, you may feel that you have not had enough money back as if you had kept the money you could have earned interest on it in a savings account.

Another possible problem is that once you lend someone money, they may expect that you will be able to do it again. They may ask for money at a time when you may not be prepared to lend it. But if you refuse and then seem to have money, they may not like it. They may think that if you have money you should be letting them borrow some of it. It may be that you decide to lend money to someone else instead and they may not like that. They may feel that you are putting that person before them and it may just be that you thought it was their turn or that they asked you first. If you get a reputation for lending money you may find that a lot of people start asking you and you may find it really difficult to decide who you think deserves it the most.

Of course, not all friendships are like this, but money can really come between people. It can best to avoid lending to anyone and then it will not be a problem and it will not come between you. Even discussing the subject may cause a problem so it is often best to avoid talking about money very much, not letting people know how much or how little you have and then they will not even know whether you have enough to be able to lend them some if they need it and then they will never ask. If you really do want to lend it to them, then have a written agreement between you. Write down how much was lent and how you wish it to be paid back and whether or not you expect interest on that payment. It may all seem rather formal, but it will mean that there will be no disagreements with regards to the circumstances. It can always be changed, but you will both have to agree to it. Make sure it has clear details of how much was lent and when and how much is to be paid back and by when. It might be that you want instalments or a lump sum, that you only want back what was lent or you want a small fee or to charge interest. Discuss it between you, write it out and sign your agreement so that everything is clear.