The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald

The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.

You’ve only got to look at the wall-to-wall coverage Greece’s problems to realise that getting into debt can bring a whole host of problems.
Last week, we put the spotlight on some of the pitfalls of debt.
But many of us will recognise that there are times in life when you do need to venture into the world of borrowing.
If you are aware of the issues, then there is nothing wrong in debt, as long as you understand what you are getting into - and have a secure plan to pay back any loan.
If you want to borrow money and pay back an amount every month, a personal loan is one option you can consider.
Here’s what you need to think about before you borrow . . .
Personal loans are loans that a bank or other lender makes that are not secured against any asset such as your property. They’re also known as unsecured loans.
Personal loans – The pros

• You may be able to borrow more than with a credit card. 
• Your personal loan repayments may be fixed amounts. That means your repayment amount is going to be the same every month and it’s easier to budget. 
• The interest rate you pay on a personal loan is also usually fixed (but not always). 
• You can choose how long you’d like to take to repay the loan. Remember the length of a loan will affect the amount you are charged in interest. 
• You can consolidate several debts into one personal loan, potentially reducing your monthly repayment costs. But be careful, as this may mean extending the length of the loan and so paying more overall. 
• You can make over-payments or pay off a personal loan in full before the end of your agreement without penalty. However if you repay more than £8,000 in any 12-month period the lender may charge compensation (although the amount the lender can charge is limited by law). 

Personal loans – The cons

• Personal loans have higher rates of interest than some other forms of borrowing, particularly if you want to borrow a smaller amount, such as £1,000. 
• Because the interest rate may reduce the more you borrow, you may be tempted to take out a bigger loan than you need. 
• Older loans (taken out before 1st February 2011) normally have an early repayment charge if you want to pay off your loan early or overpay. 

Many personal loans have a cooling-off period? You have a 14-day cooling-off period from either the date the loan agreement is signed or when you receive a copy of the agreement, whichever is later. If you cancel, you have up to 30 days to repay the capital and interest.
What to watch out for . . .
You may not actually get the interest rate advertised with the loan, which is known as the representative APR (or annual percentage rate).
This is the rate that you will see on posters or banks’ websites, but not everyone will qualify for it. In fact, loan providers only have to offer this rate to just over half (51%) of borrowers they lend to.
If your credit rating is less than perfect, you may be accepted for a loan but charged a much higher rate of interest than the representative APR. Your application for a personal loan will not necessarily be accepted.
Some personal loans have variable interest rates, meaning they can go up or down. If you’re only just able to afford the initial repayments you should avoid this type of loan in case they do go up.
If you are already struggling to pay your bills and repay our debts, you shouldn’t take on extra debt such as a personal loan.
You can find out more about money matters on the new-look Clay Shaw Butler website (under our news for business section) -
http://www.clayshawbutler.com/news/latest-news-for-business
We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.
We stay ahead of the game by putting great store by continual professional development for our staff.
With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.
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The team at Clay Shaw Butler can be contacted on 01267 228500.
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