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Should you pay your Car Loan off Early?

Many people borrow money to buy a car as they tend to be significantly expensive. It can be that a car is too dear to buy outright and so there is not time to save up for one before it is necessary to buy it or that you are just not that good at saving or do not have the funds and time to wait to pay for it this way.

Once you have a car loan though, you do not have to feel that you are committed to keep it forever. You can pay it off early, in most cases. It might be worth thinking about doing this for a number of reasons.

Check to start with, with your lender, to see whether it is possible for you to be able to pay the loan off early. You may find that you are tied in and cannot, but this is rare. What is more likely is that there will be some sort of penalty for paying it back early. This might come in the form of some sort of fine or charge. This could seem hugely unfair but actually it may just be a modest administration fee or a month’s interest payment. It will change between lenders and so you will need to look in your terms and conditions to see how much it is. It could be easier to just telephone their customer services and ask them to work it out for you.

Once you have this figure then you have the means to calculate whether it will be cheaper for you to pay the loan back early or not. You will need to know how much interest you pay each month and how many repayments you have left. Multiply one by the other and you have the cost of your loan. Then you need to compare that cost with how much you will have to pay to the lender for the privilege of paying the loan off early and decide whether you think that it is worth it. Obviously if it costs you more to pay it off early, then it is not worth doing. However, if you will pay less to pay it off early, then it makes financial sense to do this.

Once you have done this you need to consider how you will pay it off early. It might be that you have the money available and that is why you were trying to decide whether to pay it off. That is great, you can go ahead and do it. However, you may not be in that situation. You might be hoping to pay it off early, but not sure how you will actually afford to do it.

If you have savings, then it can be well worth using those. It is likely that they will be giving you a lower return than you are paying out for your loan. If you compare the interest rates, you will be most likely to see that the interest rate on the savings account is less that the interest rate you are paying on the loan and therefore you would benefit financially if you used the savings to pay off the loan. If you do not have savings or do not have enough then you will need to find another way.

It could be worth asking the lender if you can make bigger repayments each month. If you have a bit of spare money each month, this will enable you to be able to do this and it should help you to pay the loan back much more quickly. They may not allow this though and you may need to put money aside until you have enough of it to be able to pay off the loan in one lump sum. It could be worth opening a savings account to be able to do this and then you will keep the money that you are saving separate and you will be less likely to spend it. You will be able to watch it grow and put all your spare money into it. It can also be wise to put some in it every month when you get paid so that you do not overspend and forget to leave a bit to save. You should soon have enough to pay off the loan.

How old should you be Before Taking out a Mortgage?

Deciding whether to take out a mortgage is never easy and making sure that you time it correctly is also tricky as well. There are many different factors that you need to consider and your age could be one of them. You may feel that you are too young or too old to take out a mortgage.

If you are young you may feel that you will not be allowed a mortgage because of your age. You may think that you should not be thinking about settling down yet, but keeping your options open with regards to this sort of thing. You may think that you will not be able to secure a loan because of your age. If you are older you may think that you will not get a mortgage as you are too close to retirement to repay it, you may worry that it is too much responsibility to take on or that it will be more expensive because you will be seen as more of a risk.

Of course, although you might be right about any or all of these factors, each individual case is different. Mortgage lenders do consider each case, they do not have hard and fast rules that apply to everyone. They will be interested in many factors and although age may influence some of them, it may not be the main reason for accepting or denying someone a mortgage.

They will want to know, overall, that you will be able to repay the mortgage. Therefore, they will make sure that the house is worth enough to cover the amount of money borrowed in case they need to sell it to repay the loan. After that they will look at the mortgage applicants and see if they feel they are capable of making those repayments.

They will look at salary as a big factor. Normally they will want you to have been in a job for three months or not be in a probation period with a job. This really has very little to do with age these days as people change jobs a lot more regularly as they used to. They will also want to make sure that you have the funds to make the repayments. This means that they will look at the money you have coming in and going out and see whether there will be enough left to cover the cost of the mortgage repayments. Again, this is not to do with age but more to do with whether you have the available funds at the time that you are taking out a mortgage. It can be also worth considering the fact that middle age may not be the best time to actually take out a mortgage. You might be more likely to have children at home and this will mean that your expenses will be higher and you may be in a couple with one of you at home looking after the children or perhaps sharing the job by both working part time. This could mean that you will not have the available funds and salary amount required by a mortgage company to lend you money.

It is also wise to make sure that when you are buying a home, that you are not likely to move very quickly after taking it on. This could be age dependent as you may be more likely to move, perhaps with your job, when you are younger, but once you have a family at school, you may not want to move them. As you get older you may also want to be closer to relatives, perhaps so that they can help you with looking after your children or so that you can help to look after them and so you will be less likely to move away from them. If you do move quickly, then the house may have reduced in value or not increased enough to cover the costs of moving. Moving costs can really add up and it can be easy to forget how much they cost. You have to pay for the solicitor, mortgage admin fees, removals and estate agent but you will also be likely to need things for the new home such as perhaps curtains and blinds, carpets, paint and wallpaper, lampshades and lamps and other bits and pieces just to make it comfortable. You may also then decide to do more major work so that the home suits you and your taste, perhaps refurbishing kitchen or bathrooms, extending, converting loft or garage and things like that which could cost significant amounts of money.
Do actually you are unlikely to be considered to be too young to get a mortgage as you are more likely to fit in the criteria that the lenders are looking for.

Are Bridging Loans Worth the Gamble?

A bridging loan is specifically used when property is being purchased. It can be used when a home is being restored or built and a mortgage cannot be given on the property because there is not enough value in the property to issue one or for when a home is being bought and the sale of a home has not completed so there is not the money available to purchase the new property. Therefore there are situations where it can be useful, but, as with all borrowing it is risky and expensive and so is it worth it?

A bridging loan is always seen as a short term solution to a financial gap. However, they are very expensive and this means that you have to be prepared to pay a premium interest rate while you have them. They are also high in administration fees, as well as legal fees on top of the high interest rate and you could end up paying a huge amount of money for them. You need to therefore be very careful, work out how much it would cost you and whether this is something that you can afford and are willing to pay. Lenders are not so willing to give out these loans these days either and this can mean that there is not a lot of competition in the market and they can therefore be even more likely to be expensive.

Bridging loans are usually taken out by property developers or landlords who need help with finance. It may be that they have bought a home at auction, need to pay for it quickly and do not have the time to organise a mortgage. In this case they would probably only have the loan for a very small amount of time and therefore the total cost would not be too high. There is always a risk that they will not get a mortgage on the property and then they will hold the bridging loan for a long time at a large expense, but this is unlikely.

Property developers may take out the loan to pay for work being done on a property which cannot be financed in other ways. Getting a mortgage on a property can be difficult if it is in a state of disrepair as you cannot borrow more than the current value, once some of the work has been done a lender may be willing to extend or give a mortgage which will be cheaper and will allow the bridging loan to be paid off. This is a more risky situation as if the work is not done well and not seen to increase the value of the property, property prices fall generally or more problems are discovered and even more work needs doing, there may be a delay in issuing the mortgage or a mortgage may not be given at all. This could lead to huge financial problems in the short and long term and so it is a big risk to take. If you cannot secure a mortgage, then you could end up losing your home due to not managing the repayments on the expensive loan.

It is worth thinking hard about your current financial situation and how well you manage at the moment. Consider how things will change with a bridging loan and whether you will be able to afford the repayments. It can be worth spending some time working out how much the repayments will actually be and seeing whether you have enough to cover them. If you are not sure work out how much you have coming in and going out each month and see whether you would have enough. If you don’t then think about whether there is anything that you can change to improve this situation. If this was a long term situation think about how well you will manage then. It is also worth considering whether there are any alternatives. There may be different ways to borrow the money, for example, which could be cheaper than this, so look into that. It may be possible for you to wait and save up the money before buying a property or having work done so that you do not need this sort of loan. It may be wise to just forget the idea altogether if you think that it will be too much of a risk for you.