Store Cards, Credit Cards And Loans. How To Borrow Money Effectively

You don't have to have the lifestyle demands of Paris Hilton to
need extra money these days. According to Credit Action, the
total UK personal debt was 1,122 billion, a growth of about
10.5% over the previous year and in the UK and each adult in
the UK has an average of 4.1 credit cards in their wallet.

In their most recent report, Credit Action also recorded 2.3
million personal loan agreements in the second quarter of 2005.
Interesting, the national money education charity discovered a
gap between the interest rates advertised for loans and the
actual interest rates paid by the borrowers.

So, with such volumes of debt, what is the best way forward in
managing your money?

1) Prioritise your spending

Decide what you need to buy and when you need it. If it's not a
necessity, put it to the bottom of the list. With Christmas
approaching, it's important that you have an awareness of your
budget. Make a list of things you need to buy – including
Christmas presents. Once you have a list, shop around for the
cheapest deal – including some internet research. Thirty
minutes of surfing the internet could result in significant
savings, which will either reduce outstanding debt or
contribute to savings.

2) Prioritise your borrowing

If you borrow money, when do you think you'd be able to pay it
back? For example, for smaller amounts of money that could be
paid within a shorter period of time – a credit card might be
the most flexible way of borrowing money. Alternatively, if you
need to borrow a larger sum of money and wish to make the
repayments over a longer period of time – then a personal loan
could be more effective. Do some homework online, sites such as
moneynet and moneyfacts provide online financial product guides
and price comparison information.

3) Prioritise your requirements

In addition to thinking about how much money you need to borrow
and how you want to repay it, you may wish to look at other ways
in which your financial products could work for you. Examples
include cash-back, reward points, charity donations etc.

4) Never, ever, take out a store card

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 not being able to pay off the balance in full
straight away. There is a strong chance that what you
ultimately end up paying – is far greater than the discount on
the actual day.

5) Do you really need it?

As Christmas approaches, it's easy to spend a little extra on
clothes, food and drink and presents. However, if you make a
list of what you need and stick to it, you're likely to save
yourself more money this way than if you went out impulse
shopping.

Resources:
http://www.moneynet.co.uk/credit-card/index.shtml
http://www.moneynet.co.uk/personal-loan-guide/index.shtml


About The Author: Rachel lives in Scotland and writes for the
personal finance blog Cashzilla – a mighty personalfinanosaurus
who lives in the Scottish hills near Edinburgh. When he's not
writing with Rachel on personal finance issues, Cash (Rich)
Zilla sees his girlfriend Nessie – the Loch Ness Monster.
Visit: http://www.cashzilla.co.uk