Why are some people better at saving money? Could your pension be at risk? How to kick start your business with a guarantor loan? Find out the answers to these questions and more from the independent loan broker Solution Loans, with lots of money saving tips and expert financial advice on a range of issues, from family budget travel to cheap home improvements and more.
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Maintaining sound financial health requires that you track and evaluate your spending, saving, borrowing, and planning activities. How you handle these activities can either enhance or distract your ability to pursue and seize opportunities as they arise. One of the The post Raise your credit score to manage your finances appeared first on Solution...
Maintaining sound financial health requires that you track and evaluate your spending, saving, borrowing, and planning activities. How you handle these activities can either enhance or distract your ability to pursue and seize opportunities as they arise.
One of the questions that often get asked is – What are some of the things you can do now to ensure your financial ducks are in a row? Well, there are several of them but one of the most common and easy to implement is checking your credit report! It is important that you know your credit score and how it impacts your financial profile.
Your credit score is your creditworthiness stated as a three-digit number (0-999). This number distils your borrowing and in particular your repayment behaviour. If you use credit and repay in full and on time and have done for many years then your score will be high.
If you have a good credit score, you’ll find it much easier to get approved for credit facilities including credit cards, auto loans and mortgages. On the other hand, having a bad score can stop you from getting approved especially by mainstream lenders such as high street banks. Luckily, some lenders may still consider you even with bad credit through facilities such as guarantor loans, bad credit personal loans and bad credit car finance.
In case you are wondering where your credit score comes from, it is derived from your financial history compiled by the UK’s three main credit reference agencies (CRAs). These agencies are commercial organisations that collate information including details of your credit accounts, physical addresses, repayment history, and financial connections with joint account holders into credit reports.
Depending on the credit rating agency (Equifax, Experian, or TransUnion) that you go to, you may get a slightly different version of your credit report. The reason behind this is that lenders do not always share the same information with all the three main CRAs.
Credit scores are calculated based on several factors that help determine your ability to service credit responsibly. Knowing these factors is important as they can help you to improve your financial profile and subsequently your credit score. Here is a quick run of the factors that serve as inputs into credit scoring models.
The best practice is to check your credit report at least once every 12 months. Also, before you apply for credit, you must go through your credit report to ensure you understand every entry.
It is not uncommon to spot a few errors in your credit report. If not picked up, these mistakes can lower your chances of getting top credit deals. Some of the mistakes to look out for include:
In addition, malicious and fraudulent credit applications could have been made in your name without you being aware. As you go through your report, you will be able to single those out if any. No one will penalise you for requesting and checking your credit reports. You can do it as often as you please.
Initially, you had to pay £2 to access your credit report. However, things have now changed and there are ways you can get your credit information for free. Here are some of the options you have.
Under the terms of the General Data Protection Regulation (GDPR) and Consumer Credit Act 1974, consumers have a statutory right to access a free credit report (it used to cost £2) at least once every year. The information you’ll receive include missed payments, details about your credit accounts, and people you have financial links with. You can opt to have your Statutory Credit Report delivered via post or access it online.
Through Credit Karma UK Limited, consumers can get lifetime access to their credit scores and reports based on TransUnion. You just need to fill in your details and go through a few instructions to complete your application.
Clear Score Technology Limited also gives its users free Equifax credit reports and scores updated monthly. You only need to provide some basic details and you’ll be signed up.
MoneySupermarket.com Financial Group Limited through its MSE Credit Club gives its users free Experian credit reports and scores. The reports are updated once every month.
In addition to the free information, you can opt to go further and subscribe to paid services that give you access to your credit information from all the Credit Reference Agencies. You get a complete picture of the information each CRA holds about you. You’ll also get fraud monitoring services, victims of fraud team support, guidance and customer service support online and via phone from Credit Analysts based in the UK.
Your credit score is your financial heartbeat. It helps you quickly check your financial health and give you pointers on what you need to do to plan and improve your credit profile. Understanding the factors that determine your credit score and the importance of regularly checking your credit report will help you plan your finances. There are free sources for credit reports that you can use or go for the paid ones which give you extra information and support.
The consumer credit market has seen its fair share of disruptions arising from innovative ideas targeting consumer experience and convenience. For instance, over the last decade, the UK has seen the rise to prominence of a new consumer credit business The post What are the Pros and Cons of Buy Now, Pay Later (BNPL) Finance? appeared first on Solution...
The consumer credit market has seen its fair share of disruptions arising from innovative ideas targeting consumer experience and convenience. For instance, over the last decade, the UK has seen the rise to prominence of a new consumer credit business model known as ‘Buy Now Pay Later’ (BNPL).
Buy now pay later providers such as Klarna, Laybuy, ClearPay, and Paypal Credit strike partnership deals with retailers to give consumers access to upfront credit to help them complete their purchases. Repayment of the credit advanced can either be staggered in fixed instalments over an agreed-upon duration or settled in a one-off payment at a later date.
A 2020 report by Worldpay, puts the annual rate of growth of buy now pay later in the UK at 39%. Another report by Capital Economics, a leading independent consultancy revealed that one-fifth of the adult population in the UK (10 million people) used ‘buy now pay later’ as an option to help them complete their purchases in 2020. Further, the report noted that nearly 4% of all 2020 retail sales in the UK were made via the buy now pay later payment model.
Before delving into the pros and cons of the BNPL model, there’s a need to understand how this payment method works. Here is a quick stepwise summary to help you wrap your head around it.
Klarna’s “pay in 3” offer means the cost of your purchase is divided into three payments that are made every 30 days – the first payment at the time of purchase and the final payment 60 days later. There is no interest or fees to pay. So it’s a good alternative to a short term loan or a credit card.
The BNPL option confers significant benefits both to consumers and merchants. Here is a quick overview of the benefits consumers should expect when using it.
Well, almost everything that exists has its pros and cons and this applies to buy now pay later credit as well. Despite the many pros listed above, buy now pay later has a number of disadvantages that you must watch out for.
In the United Kingdom, the Financial Conduct Authority (FCA) is the body mandated with the regulation of financial firms and services. However, BNPL providers are currently not regulated by FCA.
Having said that, there is a push by the regulatory body to have such credit offerings covered by its rules. The argument is that billions of pounds are lent to consumers through unregulated transactions thereby putting them at risk of plunging into financial difficulty. The FCA believes that it is easy to build up unseen debts of £1000 or more.
Under the proposed regulatory framework, BNPL providers will be required to conduct hard credit checks on consumers in addition to affordability tests before extending credit. All this is aimed at cushioning financially vulnerable consumers against insecure and unsustainable debt offerings.
The buy now, pay later industry has witnessed tremendously rapid growth with firms such as ClearPay, Klarna, Affirm and Laybuy taking the centre stage. The credit extended with this type of product now stands at £2.7 billion in the UK alone. The advantages of instant credit, deferred payment arrangements, and low to zero cost credit have made BNPL very appealing. With that being said, consumers must be careful not to take debt they cannot afford. In the meantime, the FCA is looking to put in place a raft of measures to ensure that buy now pay later activities are brought under its wings and that consumers are sufficiently protected.
The post What are the Pros and Cons of Buy Now, Pay Later (BNPL) Finance? appeared first on Solution Loans.
As energy costs have risen in the UK we are increasingly being advised to continually switch energy suppliers to avoid the worst of the price rises. However, since November 2016, nearly 20 small suppliers have gone bust or left the The post What happens if my energy supplier goes bust? appeared first on Solution...
As energy costs have risen in the UK we are increasingly being advised to continually switch energy suppliers to avoid the worst of the price rises. However, since November 2016, nearly 20 small suppliers have gone bust or left the market and this has made many consumers nervous. So, should you continue to switch – especially away from the big names in the industry – and what happens if the energy supplier you’re with goes out of business?
The energy supply market is one that has long been dominated by the Big Six (British Gas, EDF Energy, E.ON, Npower, Scottish Power, and SSE). However, over the last decade, we have begun to see many more competitors entering the market. These new businesses are often innovative and small, seeking to find new ways to deliver energy, frequently in a way that is cheaper or more efficient for consumers. Eversmart, for example, allowed customers to pay for a year’s gas and electricity usage up-front in order to secure the cheapest rates. However, despite this innovative thinking, Eversmart went under and it’s not the only new energy supplier to have done so in recent years.
Each situation is different and there could be any number of reasons why an energy supplier ends up being forced out of the market. Experts highlight the uncertainty of Brexit as one of the major issues, as well as high wholesale prices, the Winter Price Cap and a number of other unexpected costs. Some suppliers may also simply be disappointing customers, many of whom have much higher expectations in terms of energy delivery and value for money than used to be the case.
It’s not the end of the world for a customer if an energy supplier goes out of business. Ofgem is the energy industry regulator and will step in where a supplier has gone out of business. It will protect any existing balance that you have on your account with the supplier and also ensure that your home continues to have an energy supply. Ofgem will then find another supplier for the energy needs of any customers who have been affected. It does this not by simply selecting a supplier but giving them the opportunity to bid for customers so that you get the best possible deal on your new energy contract.
Do I have to stay with the new energy supplier? No, you’re not locked into a deal that you didn’t personally choose and you can leave at any time with no exit fees to pay.
Can I switch to a supplier of my choice straight away? Ofgem recommends waiting until the new supplier has been appointed and gets in contact with you – it will be much easier to then switch to the supplier of your choice after that point.
Do I have to take action to switch to the new supplier? Ofgem will handle the transition to the new supplier for you and you don’t need to do anything.
Am I likely to experience a disruption in terms of my energy supply? No, everything should remain the same in terms of customer experience.
What happens if I have a prepayment meter? You can keep using this in the same way as you were before until a new payment device arrives.
What tariff will I get with the new supplier? In this situation, customers are usually moved onto the ‘deemed tariff,’ which is designed to match the rate you were on previously. However, if your bills do go up you can leave and find a cheaper supplier.
Ceased trading: October 2019
Number of customers: 134,000
When Toto Energy went under in late 2019 Ofgem released a statement reassuring the supplier’s customers that there was a safety net. It said credit balances were protected by the regulator and prepayment meters could be topped up as normal. It provided two key pieces of advice to customers: 1) take a meter reading as soon as possible so as to provide this to the new supplier and 2) wait until the supplier chosen by Ofgem makes contact before attempting to switch to a new supplier.
Although smaller energy suppliers have a higher chance of going bust their customers are completely protected by Ofgem. These new businesses represent an important tool for continuing to put pressure on the Big Six energy businesses to be more competitive and innovative. Customers who support them are helping to make the energy market more diverse and less expensive for everyone.
Are you paying too much for your insurance? Most of us consider insurance essential, whether it’s for your home, car, pet or holiday. However, it’s often difficult to know whether you’re getting the best deal when it comes to policies. The post How to avoid being ripped off by insurers appeared first on Solution...
Are you paying too much for your insurance? Most of us consider insurance essential, whether it’s for your home, car, pet or holiday. However, it’s often difficult to know whether you’re getting the best deal when it comes to policies. Now, a new assessment from the Financial Conduct Authority (FCA) suggests that many people are being overcharged for insurance and that this is disproportionately affecting those on low incomes. So how can you avoid the big insurance premium rip-off?
The FCA found that six million motor and home insurance policyholders are being overcharged by insurance companies by around £200 a year – each. According to the regulator, this is the result of the “loyalty penalty,” whereby the customers that remain loyal to insurance companies are not being offered the best deals. However, the regulator’s negative assessment of the insurance industry goes further than highlighting how insurance companies aren’t giving loyal customers the best deals. It also found that the sector is actually targeting those they consider to be the most loyal with the biggest price increases because they are the least likely to switch. There are also many ways in which the insurance industry will try to put up obstacles to customers leaving for another, cheaper provider, for example by using automatic policy renewal practices. The spotlight being shone on the industry by the FCA comes in the wake of a significant rise in customer complaints about the insurance sector – complaints about renewal hikes, for example, increased by two thirds in just one year.
Recent examples of those who have been hit by the premium rip-offs have been published in the mainstream media. They include:
Elderly and low-income groups were identified by the FCA as the most likely to be hit by insurance price rises. Two years ago the FCA introduced the practice of requiring insurers to publish the premium from the previous year when sending out a renewal letter to try and stop this happening. However, there is still more that could be done, for example requiring providers to automatically switch a consumer to the cheapest deal that is most appropriate for them.
Insurance may be essential but that doesn’t mean that you have to be caught out by insurance premium rip-offs.
For most of us, the concept of debt is as a sum that is borrowed and then repaid as soon as possible. However, while that might be the case for regular finance, student loans are rather different. As a result The post Should I repay my student loan early? appeared first on Solution...
For most of us, the concept of debt is as a sum that is borrowed and then repaid as soon as possible. However, while that might be the case for regular finance, student loans are rather different. As a result of the very specific terms and conditions that come with student loans, for some people, it may actually make more financial sense not to repay student loans. So, how does it work?
This is the first essential question. Depending on when you went to university you will have a different type of loan and alternative rates of interest and repayment might apply.
First of all, it’s worth noting that most student loan repayments will be automatically deducted from your salary once you go over the specific threshold for your type of loan. So, you will not have any choice about making the basic repayments. What many students are currently struggling with is the question of whether they should overpay on a loan – or pay it off completely if they have the cash. The short answer to that is unless you are earning more than £50,000 a year, you’re otherwise debt-free and you’re not likely to want to get on the housing ladder any time soon there may not be any financial benefit to you in committing to total repayment. Here’s why:
Rather than trying to clear such low-interest debt that is going to disappear at some point anyway, it makes sense for many people to invest extra cash elsewhere. For example, you might have credit cards or other debts from your student days that are smaller but have higher interest rates. So clearing other debt should be more of a priority than overpaying on student loans. Putting money aside into savings can also be more constructive than sending it to your student loans lender. If you’re lucky you might find a savings interest rate that is higher than what you’re paying for student loans. But you can also create some security by putting that additional money aside for a rainy day.
For many people, working to overpay or fully repay student loans as soon as possible just to be debt-free just isn’t financially smart. Rather than worrying about having that debt hanging over you, it may well make sense to use the extra money in a different way to help secure your financial future.
The rollout of smart meters across the UK was supposed to make life easier for consumers and introduce a new level of transparency to energy use. However, the original deadline set by the government to have smart meters installed (or The post Why are smart meters delayed? Is this a problem? appeared first on Solution...
The rollout of smart meters across the UK was supposed to make life easier for consumers and introduce a new level of transparency to energy use. However, the original deadline set by the government to have smart meters installed (or at least offered) to every home in the UK by 2020 has now been delayed. Instead, a new target of 2024 has been set. So, what does this mean for UK consumers and why has the rollout fallen so far behind schedule?
At the time the deadline was set energy providers suggested that it was not realistic. Most felt that that the technology required was just not ready. Plus, many providers said that they simply wouldn’t have the time or resources to get smart meters into the requisite number of homes by 2020. The new deadline means that they now have until the end of 2024 to install smart meters in at least 85% of customers’ homes.
Partly due to problems surrounding the technology itself, there have been a number of issues that have arisen with those smart meters that have already been installed. For example, many consumers found that the smart meters they were given only worked if they stayed with the same supplier and were useless if they switched. Some smart meters only work sporadically and others seem to be affected by changing environments, such as weather conditions.
As of June 2019, around 15 million smart and advanced meters were up and running in the UK. The overall goal for installation is 53 million smart meters in both homes and small businesses – now by 2024.
A smart meter is basically the same as a traditional electric or gas meter used to monitor energy consumption. The big difference is that the information it collects is sent straight to the energy supplier. Consumers are also able to monitor their own energy usage via the data that appears on the smart meter screen.
It will give energy companies a chance to fix the technical problems that have plagued smart meters and to find a model that works for everyone. It could also help to avoid a swathe of customer service complaints. In order to meet the rollout deadline, many energy companies have been repeatedly and aggressively targeting consumers with smart meter communications. This should ease off now that the deadline has been moved.
Although energy suppliers are under an obligation to ensure that every home is offered a smart meter, there is no requirement for consumers to accept one. There is no upfront cost to consumers in having a smart meter but no obligation either. Consumers can choose to have a smart meter when offered, to request one from a supplier if not yet offered, or simply to opt to have one installed at a later date. That applies to homeowners as well as to tenants who pay their energy bills directly to a supplier, as opposed to via a landlord.
Although this is arguably the worst time for a delay to the smart meter rollout – given that Brexit is on the horizon, winter is coming and many individuals are struggling financially, it may turn out to have had advantages. Smart meters that work and actually provide promised benefits for consumers – as opposed to making life more difficult – will be far more beneficial even if they arrive a little late.
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