Personal Finance Articles

Students can expect to pay the following whilst attending University according to government figures:

£4,125 per year in course costs (such as tuition fees)

£6,897 per year in living costs (including basic living requirements, household costs, course and non-course related costs such as travel and entertainment)

In the last year of their studies the average student debt figure was calculated at £8.666 in 2004. Three years later that amount is estimated to have shot up to an average of £15.000.

Once a student graduates, they then have to begin repaying that debt. There's no guarantee however that recently graduated students will get a job straightaway, add to this various other impending financial responsibilities - rent, loan repayments, even a mortgage and paying back debt could seem a daunting prospect.

Graduates should consider setting up a meeting with their personal banker or account manager. At this meeting they should be able to discuss their current situation, their future prospects and plans, and hopefully arrange a repayment plan that won't have to much of an adverse effect on their quality of life and should allow them pursue their career, at the same time as paying off their student loan and any other debts.

In the event of the bank not offering a repayment plan that seems affordable then graduates should consider other measures.

Graduates should consider getting a credit report from one of the credit watching organisations such as Experian or Equifax. This is information any consumer has a legal right to.

A credit rating is a score awarded to a consumer, reflecting their financial history and considers factors such as a person's track record in making repayments on loans, meeting bill payments and paying off debts.

This score is used by potential lenders to assess whether the consumer is high or low risk. Consumers proven to be high-risk stand a greater chance of being refused financial products like loans, credit cards and mortgages. Even in the event of a successful application there is a good chance they will have to pay higher interest rates.

If the graduate has credit card debts on their credit score, they are entitled to offer their version of events, which may hold sway with certain loan applications in the future.

Graduates should also keep in mind that being in some form of employment will probably cause banks to view them more favourably and may even agree to another meeting to arrive at a positive resolution for the situation. While this may put immediate career plans on hold, again, it does have a beneficial effect on the graduate's credit rating.

The other route available is to take a further loan to pay off the existing one. However, this may be harder than it seems with the affected credit score having an effect of its own; lenders may not be so enthusiastic to offer a loan to someone who, apparently, has little or no means of meeting repayments. If you are approved however a number of banks such as Natwest Loans offer very competitive graduate loans.

If you do decide to take out a further loan it's important to consider whether you can realistically afford to keep up payments. You can generally find loan calculators on lenders websites, the RBS loans or the Asda Personal Loans websites for instance. Motley Fool offers useful advice and an impartial Loans comparison.

Graduates should also ensure they’re getting the best possible deal on their current account. The big attraction of graduate accounts is their interest free overdraft facilities, in some cases up to £2,000 in the first year after graduation. Essentially graduates should be looking for the highest Interest free overdraft and shouldn’t be afraid to shop around. Some banks offer much better deals than others so graduates shouldn’t hesitate in switching to a different bank if theirs isn’t competitive. Currently the best deals available appears to be the RBS graduate current account which offers £2000 interest free for the first year with year two and three at £1500 and £1000 respectively.

Any consumer who has entered into a billing contract with another party, such as utility bills, loans or credit cards ought to have a credit score - also referred to a credit rating or credit report - or rather many as there is more than one company that offers these; the biggest being Equifax or Experian.

Visit Uswitch or The Fool to find the best deal available. We did and established that Natwest offers a particularly competitive deal on their credit cards - 0% on balance transfers over 13 months plus 0% on purchases over the first 3 months. Ultimately, you will always be better off shedding the credit cards and changing to a personal loan. The Motley Fool can assist you to compare unsecured loans in a flash. A couple of great ones to choose from at the time of writing, for my personal circumstances were:

Most of us have a somewhat confused attitude towards credit cards. On the one hand they're a quite convenient method of payment and if you manage the repayments responsibly offer a handy alternative to paper money. At the same time we're all instinctively wary of them. Everyone's heard horror stories of livelihoods consumed by credit card debt and a large number of us have felt a, hopefully fleeting, taste of how owing money can very rapidly spiral out of control with one or two missed payments and one or two silly purchases. "I'll pay with my card" has developed into a turn of phrase touched with a frisson of danger.

The process of going for a credit card has thus matured into, for many, quite an important venture. We all wish to know that we're not getting ripped off and, as far as possible, we'd all like to believe that, unlike all the other saps, we're saving money. In truth of course it's probably best to forget the idea that there is one credit card that towers over the others and represents the ultimate deal for all. No such holy grail exists and in fact there's really no such thing as a one-size-fits-all credit card. This isn't to say that there are no good deals out there; it's just that it's more a case of selecting the right card for your specific needs.

The onus is also on you to manage your credit cards effectively and make them work to your financial benefit. So the first question is: Do you currently have credit card debts? If you do then your priority should be to find a card with a good balance transfer rate - there are plenty out there with a 0% balance transfer offer. When you transfer your credit card balance you are effectively paying off your current debts on one card using a new card so that you now owe money to the new card. If that new card has a special introductory cheap rate for balance transfers then your initial, more expensive, card will be debt free and you'll be paying less interest, potentially 0%, on your new card. The trick to paying off this debt without incurring any additional financial load is to ensure that your monthly repayments are sufficient to cover the debt before your introductory cycle matures.

The most important rule to remember is not to purchase anything with your new balance transfer card; if a card permits a genuinely good balance transfer rate then the chances are it won't offer a similarly attractive purchase rate. If you still want to spend on a credit card then you'd be well advised to get an extra card for purchases and focus solely on paying off your balance transfer debts with the first card. If you're doing this, it's clearly in your interests to find a card with a good introductory deal on purchases. At the time of writing the NatWest credit card was offering the longest 0% interest on balance transfers for 13 months 0% interest on purchases for 3 months with a rate of 13.9% thereafter thereby buying you more time to pay the card off. HSBC is offering the longest 0% on purchases deal of 12 months and then a 15.9% typical APR and even the supermarkets are muscling in with reasonable offers with the Asda 0% credit cards being the strongest.

Living in the information age, we are blessed with a number of web sites similar to The Motley Fool, which assist you to compare many different credit cards and acquire one that best meets your needs. Always make a note on the calendar or your electronic diary so that you may switch as close to the end of your introductory period as is allowed to keep away from falling back into the trap and paying through the nose.

So which card is best for balance transfers? If you're hunting for the longest 0% period then Virgin steams in front with an impressive 15 month interest free period on balance transfers, they do however charge a relatively high 2.98% fee. Perhaps the best overall deals at the moments are offered by Natwest credit cards and RBS credit cards who both offer 0% for 13 months and a lower 2% fee. Other decent 0% credit cards worth investigating are offered by Asda Finance (0% PA for 9 months, 2.5% fee), Capital One Platinum (0% PA until 1st August 2008, 1.7% fee) and Mint (0% until 1st Oct 2008 (2.5% fee).

That Britain is slipping into a personal debt crisis has been well documented for a number of years now. The UK's burgeoning levels of personal debt have, for a long time, far outweighed that of our European neighbours. Indeed, figures released last year revealed that the average consumer in this county is £3,008 in debt compared to an average figure of £1,558 across the rest of Western Europe. Alarmingly the UK is now responsible for a third of all unsecured debt in Western Europe.

Further indications of Britain's escalating personal debt crisis are there for all to see in recent figures on personal debt: The total figure for personal debt in Britain in June 2007 was £1,355bn with the growth rate growing to 10.1% for the last 12 months; it would appear that this is not a problem that shows any sign of slowing down. Including mortgages the average household debt for the UK is £56,000, excluding mortgages the figure is £8,856 and if based on households with some form of unsecured loan the average amount is £20,600. Every 4 minutes this country's personal debt is rising by a million pounds.

However alarming things look for the country as a whole there’s no reason why you should succumb to serious debt yourself. Effective money management is mostly straightforward common sense, by keeping a tight reign on your borrowing and staying on top of repayments you can nip debt-related stress in the bud.

Don't spend money you haven't got

Maybe this is a fairly obvious sounding suggestion but stick to it and you can’t really go wrong. Most people’s debt problems are a product of relying too much on a buy now pay later attitude.

Be disciplined with debt repayments

The quickest way of accumulating debt is by paying it off too slowly. This is especially true of credit cards - ideally you should aim to pay off your cards in full every month, remember that the quicker you deal with debts the less likely they are to spiral out of control. Far too many of us simply make the minimum payment on our credit cards every month and whilst this may seem like a convenient option you should be aware that this is exactly what the banks want you to be doing. In fact because the amount of the minimum payment decreases at the same rate as your balance this is an arrangement effectively calculated to keep you in debt. Instead, set the monthly payment to something you can manage and keep it at that - you’re debts will be cleared far more quickly

.

Transfer your balance

The first thing to consider if you feel like your credit card debt is getting out of hand is to transfer the balance to a card with a 0% introductory rate. There are loads out there, just look for the longest 0% balance transfer period. Currently the market leading 0% cards are probably offered by Natwest credit cards and RBS credit cards who both offer 0% for 13 months although you can keep up to date with these things by consulting a comparison site like fool.co.uk's credit cards centre. The one thing to remember if you're doing this is not to use this card to buy anything. The likelihood is that it won't have a purchase rate that is anything like as competitive as the balance transfer rate

Never, ever, take out a store card

These are generally sold by tempting shoppers with short term store discounts, don't fall for it! Whatever the discount the store offers you on the day, remember, it won't be as a gesture of goodwill. Nearly all store cards carry a vastly inflated rate of interest and they rely on you paying off the balance in full straight away.

Make sure you can afford your loan

Before taking the plunge and getting a loan give consideration to whether you can comfortably afford the monthly repayments - be realistic and don’t overstretch your finances

. As long as you budget carefully and don't borrow more than you can comfortably afford to pay back then there no reason not to consider an unsecured loan. In fact with rates historically low at the moment now could be a good time to borrow. Currently there are a few lenders offering loans at 6.5% or cheaper, two of the best on the market at the moment are the A&L personal loan at 6.5% and the Moneyback Bank loan at 6.3%. You would be well advised however to first check a loans calculator (most lenders have one on their website - there's one on the A&L Loans site for instance) this should give you a good idea of what you'd be paying every month.

Do you really need it?

Its good to be impulsive in life but extending that philosophy to your spending is a sure fire way to wind up with crippling debts. Try to get out of the ‘buy now pay later' mentality.

The demands of modern life frequently compel consumers to borrow funds through taking loans. The settling of debts, improvements to the house, school & college fees & business plans are all burdens that need additional financial clout. Even though loans simply help to make the impossible possible, it’s important that the different packages within the arena are measured thoroughly.

Personal loans are unsecured loans that are designed for people who want to borrow up to £25,000 over a fixed term. This means that the loan company has not secured their investment against any existing residence or shares that the borrower may have. As this is a risk for the lender, it does mean that the rates of payment are likely to be slightly higher than on a secure loan, reflecting the nature of the risk. As they are designed to be paid off over a fixed term, a few companies place penalties on individuals who try and pay off their personal loans early, often in the form of a large, accumulated interest bill. In this case, it may be worth thinking about a flexible loan, where such charges do not apply.

These loans are agreed at a fixed rate, meaning that they will be assessed on the current rate of interest and that will not change over the length of the loan itself, as the repayments are made monthly, the rate of interest paid will fall accordingly as it is calculated on the monies that are owed. Due to of the risk involved, a borrower's credit rating can affect the cost of repayments. A credit history rating is calculated using a mathematical formula and by comparing the spending and repayment habits of individuals to see how much risk is involved in loaning to an individual.

A good history will generate a good credit score, and vice versa. Those with bad credit scores can expect to pay higher rates of interest where repayments are concerned, but it is not continually feasible to find out what that rate is until after application for a personal loan. It looks to be suitable for the consumer to take on a smaller loan that can be paid off as fast as possible. A huge loan taken out during a greater period of time may keep the rate of the repayments down, but the actual amount of interest paid back over this time will be more expensive than if the borrower were to borrow the same sum over a shorter term. This system can vary however. Alliance and Leicester for example offer a top up option on their unsecured loans so existing customers can simply update their current arrangement whilst maintaining the same monthly repayment rate

As can be predicted, there are several players in the loan market & competition for market share is intense. This results in one or two very alluring rates that consistently tempt borrowers to change from one provider to another. However, leaving a loan company can incur penalties & this effectively reduces the attractiveness of the newest offer. It is strongly recommended to consult a professional body like the FSA, who will give impartial advice without any marketing terminology. It would additionally be wise to make use of an online loan calculator to get a better idea of the propositions scale. An easy to use calculator can be found on the Asda personal loans or if you prefer, The Fool provides a good example of this kind of indispensable loan calculator as well as the ability to compare loans online.

The ways in which premiums are calculated varies from insurer to insurer and product to product, hence the disparity between cost of Asda Home Insurance & L&G Home Insurance for example. The cost of home insurance is mainly established on the rebuild cost of the home i.e. what it can cost to replace the building in its entirety. The cost can also be partly dependant on perceived risks to the property, such as its location, the installation of security devices or fire alarms. The repayments, or premiums, are normally made to the insurer on a monthly basis for a set period of time. Home Insurance premiums can be costly but there are ways of decreasing costs:

With the vast amount of firms providing home insurance policies, it does seem an unfeasible and long task. However, there are comparison websites around such as www.fool.co.uk that will identify and compare different policies such as home and life insurance on your behalf.

If you have recently graduated you’ll no doubt be delighted to discover that banks place a greater value on your custom than everyone else's. However worrying the state of your student debt ravaged finances may currently seem you should be heartened by the fact that at this early stage in your banking life all the major high street banks will be clamouring to get you on board.

The reason is fairly obvious - once young individuals set up an account with a bank more often than not they'll remain loyal to that bank for years. Banks can sadly depend on the fact that their customers, whether through laziness or apathy, are unlikely to shop around for alternatives. It's a bizarre form of brand loyalty that often means banks can get away with offering non-competitive financial products to established customers who will none the less buy into them without even bothering to look at the alternatives.

The good news is that with the potential of a lifetime of lucrative custom at stake, the major banks are generally prepared to attract young account-holders with student and graduate accounts that offer considerably better terms than a regular bank account. If you've just graduated now is a great time to investigate your options - don't fall into the trap of sticking with your current bank for convenience sake, the fact is there are lots of competitive graduate accounts out there so you may as well consider your options.

The item that should be top of any graduate's requirements is an account that offers a high interest-free overdraft. The best deals available at the time of writing were offering a £2000 interest free overdraft in the first year (The RBS current account and the Natwest current account for graduates both offer £2000 interest free for the first year although the RBS account offers the better long term deal with year two and three at £1500 and £1000 respectively compared to £1000 and £500). You could possibly save yourself hundreds of pounds whilst ensuring a crucial buffer and opportunity to clear debts by opting for a competitive graduate account that ensures a good 0% interest overdraft over the full three years (some accounts offer a one year 0% overdraft only, whilst HSBC doesn't offer one at all).

The golden rule is not to stick with your current bank simply for the sake of convenience. It really is worth the small effort of regularly reassessing your account, comparing your deal with other offerings on the market (There are several comparison sites out there, Motley Fool for instance have comparison tables for everything from loans to credit cards) and not being afraid to change. By having an inflexible attitude to who you bank you're as good as throwing money away.

With the cost of car insurance, road taxes, MOT and Petrol on the rise constantly the effect is that it gets more expensive to keep a car on the road. The expenses mentioned are constant for all of us in that to legally drive we all have to pay for them. Car insurance however is a very individual cost. With the growth and popularity of comparison websites it can be very simple to just stick in your details and be presented with hundreds of various quotes; the problem is that you still have to go through them before finding the best one for your circumstances.

Many of the comparison sites will only take into account the price you will have to pay for the insurance; the premium, they will not in most cases select the best cover in terms of your personal requirements (unless your only requirement is the cheapest monthly charge). This means that it is really important to closely check any of the policies that you may be interested by. Insurance providers are now starting to provide “budget” cover to remain competitive in the market and gain a better share.

These types of bare budget policies are designed to only provide cover for your vehicle and not much more. You will be unlikely to get a car to drive if yours is taken in for repairs. Another disadvantage of these policies is that your excess in the event of a claim will be higher than other policies. The only benefit to this is if you don’t make a claim, but this is unpredictable and the reason for having insurance in the first place. It could cost you a lot if you claim even though you have insurance cover.

An option that appeals to many individuals is to be able to construct a custom policy that includes things you need and leaves out things you don’t. So, rather than merely opting for a basic cheap policy or a considerably more expensive policy with all the extras, some insurers like ASDA Car Insurance for instance, allow you to add optional extras like legal protection, hire cars and a breakdown service.

Taking ASDA Car Insurance as an example then, on top of whatever you're paying for basic cover you could add £1.50/month for legal protection, including up to £50,000 in legal costs should you need it, for an extra £2.50/month will get you a hire car for up to 14 days and if you aren't already paying for such a service from The AA or RAC you can add a breakdown service to your policy starting at £6.30.

With so much competition in the market many insurers now try and target specific groups of drivers and provide them with quotes better than other companies offer for the same policies. When taking out a car insurance policy don’t just look at how much it will cost you but how it will affect you in the long run.

Thinking back to the first car that I ever bought - regrettably a Volvo 360 - I admit that I got more than I bargained for. Not considering my finance options better at the time and just going with the flow, I was not until year later that I realised that my by then not so new car would cost me twice as much as I paid over 5 years and that I already owed more on it than it was worth.

The lesson learned was that it seldom pays to take out finance through a dealer, banks loans come with very different rates and if you can get away with borrowing the money, interest free with less rigid terms and penalties from a family member, then you should seriously consider doing so.

If you find a loan with a competitive rate over a sensible length of time, bank loans are a great source for financing the purchase of your new car and can spare you any later complications that would arise if you were to borrow from family.

Interestingly, a recent study discovered that there is a huge gap in the age difference between people financing loans through the dealership and through banks loans. Younger customers greatly favour the better deals provided by the latter while older customers tend to fool for the dealership loans trap.

We compared a number of examples from well known high street banks and found that Alliance & Leicester currently offers the most competitive car loans at 6.9% APR Typical for personal loans between £7,500 and £20,000 (as of 20/09.2007). Applying Online is also simple and takes 10 minutes and you could have a decision within the hour so can be as quick as using the dealership. However, unlike the car dealership loan, such personal loans are usually a simple interest loan with no hidden charges.