With the ever increasing cost of living and the period of easy financing by our banks a lot of people have over extended themselves financially. Basically if your monthly income is lower than your expenditure on a regular base you have a problem. (If it only happens occasionally then you should be OK if you of course saved in the better months).

So you find your self in this difficult situation? Is it the end of the world ? Not really but you must take action to reverse the situation. If you ignore it and hope the situation will improve by it selves then we have news for you. It won’t. Rather take action immediately and speak to your bank manager before he want to see you.

So what actions can one take to reverse the situation.

• Work out a budget
• Cut up your credit cards and store cards (except for one you might need it in an emergency)
• Cut unnecessary expenses (which ties in with your budget)
• Consolidate your debt
• Increase your income

How to work out your budget

1. Add all your monthly income together to see what is available
2. Start adding up all fixed expenses and classify them with 2 classifications. The first classification is the type of expenditure, the second classification is importance or need factor
3. Start adding up all the variable expenses and again classify them in 2 different classifications

Now you will have a clear idea of how much you spend and on what and how much more you spend monthly above your income

Cut up your credit cards and store cards

This should be fairly easy. Take a scissor and start cutting and feel good about your selves.

Why keep one card. Sometimes one has an emergency or a cash flow problem so to have some backup is all ways good.

Cut unnecessary expenses

Now that you know how much you spend monthly and have cut up your credit cards etc. (which should stop you from impulse spending) you can analyse the budget you made.

Now start taking away those expenses which the lowest need factor/importance. (And you still can treat your selves to an evening out, but maybe go to a less expensive place and less often)

Consolidate your debt

Now that your credit cards are gone it is time to start paying them of. But it might be wise to consolidate all debt you have into one account for example your home loan and start paying lower interest rates. credit cards,personal loans etc are notorious for high interest rates. So speak to your bank about how to consolidate. They should be all to happy that you take your financial future in your own hands

Increase your income

This might be the most difficult of them all, because maybe you all ready have 2 incomes or you work double shifts. So this option is depending on one’s personal situation

If one follows up on even some of the suggestions in this article you might be well on your way to turning around your finances without winning the lotto

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Financial Reporter is the maintainer of the following independant financial and banking blog in south africa Banking and Finance Blog and an easy to use loan calculator

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Financial tips for loans & creditcards

Credit Cards Vs Loans

If you want to take out a personal loan you can borrow up to 25,000; the main point is you get structured repayments so you know how long youre borrowing for and what itll cost each month. If you were to borrow on the cheapest credit cards it substantially undercuts the cheapestloans on offer; so in many circumstances credit cards should be the first choice. Check out the latest loan deals at www.peekoo.co.uk.

Are you trying to make existing credit card debts cheaper?

In most cases a loan will not be the cheapest option for you. Most credit card providers offer 0% balance transferdeals and they are designed to allow you to transfer other card debts to them at a special rate, usually these rates are much cheaper than the best loan rates.

By going for this option it does not mean that you need to keep transferring debts between short term 0% deals; some of the deals available last until all of the debt has been repaid. Do try to ensure that you make at least similar repayments to what the loan would normally cost you each month

Are you borrowing for less than a year or less than 1000?

Majority of the loans available over a short period or low amounts are usually very expensive. Instead there are other options available to cut the cost. Some of the credit card providers allow new customers to spend on there cards at 0% for up to the first year. As long as you can make your purchase on a card and will definitely pay it off before the 0% deal ends, then this could be a lot better option than a loan with a high APR%.

Are you trying to cut the cost of an existing loan?

Most would think that by switching to a cheaper interest rate will save you money. Many loans, especially the older ones, have lock in penalties so even though you will end up paying less interest on the loan, when you add in the fine for switching, overall you end up paying more.

Secured Loans Vs Personal Loans

Most of the high street loans available are un-secured. You would think that this option is a bad thing but it isnt. The other alternative is secured loan the kind youll see all over the TV. For the following reasons Id steer well clear unless you really have to

Your home could be taken away if you fall behind on payments.

A secured loan means you are securing the debt on your home (or something else you may own), and if you cant repay, the lender can repossess your home. With unsecured loans this is a lot less likely to happen.

Most personal loan rates are fixed, and secured loans are usually on a variable rate.

Majority of the un-secured loans available are on a fixed rate; from the start you know exactly what you will pay, and this will not change if the UKs interest rates change or the lenders rates change. For the latest rates on secured loans visit www.peekoo.co.uk.

With secured loans the rates are variable, meaning the lender can change the rates when it likes, especially in a credit crunch when you really dont need added pressure on your finances. Many secured loans have seen rates doubling, hitting peoples pockets hard which is resulting in the falling behind on payment and in some cases having the homes repossessed.

Secured loan payments are usually stretched over many years.

Secured loan lenders often tell you that there is one easy low monthly repayment, this may sound good but this illusion is made by stretching the debt over many years, so you will end up paying more and more interest, costing you a fortune.

This is very important information and something you should take seriously if considering a secured loan. Remember secured loans give your lender the security, not you. A much better option is to take a normal unsecured personal loan than one secured on your house.

Secured loans are rarely the best possible option and should be considered as the last resort of lending. If you have a reasonable credit score then you should consider a personal loan first. There are other options like cheap credit card deals or even extending your mortgage.

Choosing the right loan

Some of the lowest interest rate loans can turn out to be the most costly due to hidden costs from the lender. Before you pick the type of loan you want to apply for decide the most important factors. How much, for how long?

The maths behind it is very simple; borrow as little as possible and repay as quickly as possible. When looking for a loan always base borrowing on what you can comfortably afford to repay as over borrowing can cause debts to build up. Also before borrowing question everything; can you avoid any debt? The PeeKoo loan calculator will let you calculate how much you can borrow and at what cost.

The Cheapest Personal Loans

Have a look at the best buy tables in the PeeKoo loan section to find the best rates available. The cheapest loans with out insurance, all you need to do is find the loan with the lowest APR (Annual Percentage Rate) of interest for the amount you are borrowing.

Please be aware that all the top loans compared in our tables are typical rates, which means only 66% of those accepted actually need to be given these rates; depending on your own personal credit score you may end up paying a lot more.

Visit www.peekoo.co.uk

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Do you have any tips about working with a financial planner? What to ask, what to look for, companies to use or avoid, etc.? Relevant/helpful answers appreciated. Thanks!

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