Interest Rates: Are They Working For You Or Against You?
There are two ways of getting money for the things we want: we either save the money we earn or we borrow it from a source of credit. Opting for a loan may mean we get the things we want sooner, such as a new car, but it may be an expensive way of doing things. With consumers finding that the criteria for borrowing money has tightened considerably, interest rates are now tipping into double figures in some circumstances, especially for more short-term solutions. By the time we have finished paying off the bills we have added to our overheads, the thing we have bought is usually past its prime and outdated, so we take out another loan to get a replacement.
Saving may seem tedious, but it can offer you peace of mind that you wouldn't find when compared to the uncertainty of borrowing. Instead of having to pay interest, we get paid it. That sounds like a plan, and if this is the route you are planning to take then you need to do your homework to make sure you get a good deal. Don't let this put you off: if you were to secure a loan, you would have to do some research too.
No matter how much you earn, you can boost your assets by managing your outgoings carefully and storing away a small portion of your income each month. The importance of this has been highlighted in the news recently, with pension deficits meaning that some of us won't get support for our employers in developing a nest egg for when we retire. Now, offers such as ISAs which allow us to earn tax-free interest on our savings enable you to plan ahead for the future - whether that's in the form of a shiny new car or globetrotting when you reach retirement.
The first thing you should do is compare savings accounts. Price comparison websites allow you to compare notes on the differing features between accounts from different banks, including honeymoon periods where you will get a higher level of interest for a short period of time. By being open minded on the method you use for banking, you'll also be able to access the best savings accounts on the market, some of which might be exclusive to online, postal or telephone bankers.
Others will make no particular demands and will give the best savings rates but only over a short period of time, before reverting to a lower rate. These accounts are great if you know you will have the money you need for your new car or other luxury item after about four months, or if you are prepared to keep shifting your money to these incentive accounts. If you plan to do the latter, make sure that there isn't a clause that prevents you moving for a specified period of time before you open the account.
If you have a large amount of money to invest, then maybe savings bonds are the way forward. Interest rates tend to be higher than the average savings, and in exchange for this incentive, it's essential for you to be confident that the money won't be needed in the short term. This is because there are penalties for early withdrawals that precede the length of the bond.
Instead of paying that money in to a bottomless pit, why not pay it in to a savings account and earn interest for doing so? Too many people say they cannot afford to save but if you can afford to pay that loan back, you can afford to put that same amount into a savings account. After all, it's better that you make yourself richer rather some faceless loan company. Some of the best ISAs can be found on price comparison websites.
It also means that after you have bought your vehicle, you'll be able to carry on with the saving so that when you need a new one, you'll be in a strong financial position: it's only the first time round that you will need to wait, after that you'll have what you need - and be in a better bargaining position to get a better deal. Is there really a choice?
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