When you go out to buy a new fridge, whether you are purchasing in store or online, you will often find that the retailer will offer you credit. This means that you will be able to buy the fridge right away and then pay for it later in instalments. This makes the item much more affordable, but is it something that is worth doing?
Consider the extra cost
So you need to be very aware of the costs of doing this. You will be able to calculate how much extra the fridge will cost if you take into consideration the interest rate. Do make sure that you also consider any extra costs that there might be. There could be administration costs for setting up the loan, for example. Also there will be charges if you do not manage to repay the loan when required. It is worth taking a look at these charges as well and thinking about whether there is a risk that this might happen and if it is something that you are willing to risk having to pay. You may be confident that if you set up a direct debit to make the loan repayments then you will easily be able to pay it, but this may be the case for everyone. So give it some thought and consider all of the possible costs.
Compare with other loans
It is well worth comparing the costs of the store credit with other loans from more conventional lenders. It could be cheaper to borrow the money in a different way. Depending on how much you are going to borrow you may find that a credit card or personal loan will be a cheaper way to borrow the money. Check out not only the interest rates and costs but also late repayment fees and compare as many different loans as you can. You will then have an idea of how much you are likely to pay for different types of loan and this will help you to make a decision as to which is going to be the best for you to take out.
Interest free credit?
You may find that there are some shops that will offer you interest free credit when you buy a fridge with them. This means that you will be able to spread the payments for it, without having to pay anything extra than the advertised price. This can sound really great, but you will find that the cost of the loan has been added in to the price of the item. This means that it could be dearer to buy that specific model of fridge from that retailer compared with buying them from another. So make sure that you compare them carefully and see whether any other shops have the same model for less money. You may also find that the fees for a missed payment are much more expensive if you get interest free credit as this is another way that they could make some extra money from you. It is certainly well worth being aware and checking carefully before buying.
Is saving up better?
It is also worth considering whether you would just be better off saving up. If you are going to be paying regular instalments, then you could just put money away regularly and then use that to buy the fridge. If you need the fridge immediately as your last one has broken down, then you will not have time to do this. However, if you are replacing an old model, then you will have time to save up first. This will mean that you will not have to pay anything extra for the fridge and it can be satisfying knowing that you have taken the time to save up and are not paying more than necessary.
Obviously all of these options will take time and effort to put into place. It can feel like it is a lot of effort, but you can end up paying a lot more money than necessary of you do not do the research, It is always good to know exactly how much you will be paying for things and whether there are cheaper ways to get something. Any savings that you make will mean that you are able to afford other things or to put some money in a savings account. So spending a few hours finding out how much the cost of the credit will be, comparing it with other loans and deciding whether you are happy to pay that extra or would rather save up, can make a huge difference. You could end up saving a significant amount of money just for a bit of effort. If you do this with everything that you buy then the savings really will add up.
A guarantor loan is a way that someone with a poor credit rating will be able to still borrow money. It works by you nominating a guarantor that does have a good credit rating who will be able to cover any repayments that you cannot. This will mean that the lender is not taking such a risk. The fact that the borrower does have a poor credit rating does mean that the loan can be dearer than others but it does open up an opportunity that would not normally be available to a borrower with a poor credit rating unless you used a company such as Omacl.co.uk.
Choosing a guarantor
Choosing a guarantor is a big decision. You will need to choose someone that knows you well and would not mind helping you out like this. You will also need to pick someone that has a good credit rating. Some people will not know anyone who will be able to help them out like this and normally it would only be family members that would be willing to help out on this sort of scale. Many people would probably think of asking their parents. This is because parents tend to have more money and it is the sort of thing that they might be willing to do for their children if they can. Parents normally want to help out as much as they can and if they do not have the money to provide the loan themselves, then they will be able to help in this way. Therefore many young people would pick their parents as candidates.
Advantages of choosing parents
It can be tricky discussing finances with friends and family especially if you are having financial difficulties. However, your parents are the most likely to be understanding and sympathetic and willing to help you. They are also older which means that they are more likely to have better control of their finances as well as a more secure income. This will mean that their credit rating will be higher and there will therefore be more likely to be accepted as guarantors. Some parents would help out by giving or lending their children their money, as they feel so close to them, but if they cannot afford it, this is the next best thing that they can do to help them.
Risks of choosing parents
There are some risks with choosing your parents to help you out like this. If you make all of the repayments on the loan, then everything should be fine. However, if you miss a payment and your parents have to pay it instead, then there could be problems. It may come at a time when they are struggling and not easily able to make the payment. They may want the money back form you as quickly as possible and you may not have it to give them. They may expect you to repay any money they have to pay, but you may have assumed that they would be happy to just spend that money but they may be expecting it back. If you have not properly discussed this, then you could end up falling out over it. You could also find that if you have siblings, they might get to know about it and there could be jealousy there that you had help and they did not. It could even end up making them fall out with you as well.
Is it the right decision for you?
It is worth thinking hard about whether this decision really would suit you. Consider whether it is worth all of the risks and if you need the money enough to make it worth falling out with your family over. Of course, you know your family and so you will know whether this is likely to be a problem or not. Some families have a lot of jealousy within them and some do not.
You also need to think about whether the loan is right for you as well. As well as comparing different types of loans and making sure that a guarantor loan is the right choice and finding the loan which is the cheapest for you, you need to consider whether borrowing money is really necessary. All loans are expensive and take commitment and can be a cause of stress. This means that you need to think about whether it is worth it. Consider what you are using the loan for and whether you think that you will really benefit from it. Is it something that you could save up for or do without, as if this is the case then it is probably better to go without the loan. It can be tempting to use loans as it means you can get things quickly and easily but you have to pay extra for them. Calculate the cost of the loan and decide whether it is really worth having these things if you have to pay that much extra money for them.