Why we should all care about debt
During a recent talk that Kunle gave in a school, some of the pupils had concerns about going to university. They were not concerned about the education challenges. They were concerned about getting into debt to pay for their education. They were also concerned that this debt would hinder their chances of getting onto the property ladder. There was a general feeling that debt was a bad thing.
Neither a borrower or a lender be, wrote Shakespeare. But in today’s world it’s hard to find anyone that hasn’t taken out a loan, be it for university fees, to buy a car or a house, to fund a business or maybe just using credit cards to tide us over. But just because it is everywhere, doesn’t mean we can be blasé about it. So, why should we care about debt?
Five things to be aware of when you borrow money
Nobody wants to get into financial trouble but that doesn’t mean you have to avoid borrowing money completely. It’s about borrowing responsibly.
1. Understand what the Annual Percentage Rate (APR) means for you
The APR is the annual cost of the loan. It takes into account the interest rate and fees. Look at the amount you want to borrow or how much you are likely to spend on a credit card each month and work out from there how much you will have to pay on top of the loan amount.
2. Watch out for arrangement fees
For most forms of borrowing, there will be fees applied for setting up the loan. For example, on a two year mortgage, the interest rate may be low, but if there is an arrangement fee you will need to divide this by 24 months and add the amount to the interest to work out just how affordable and competitive the offer actually is.
3. Use a budget planner
This is a really simple way to keep track of your finances and to check the true day to day affordability of any debt you’re looking to take on. Having a budget is essential for your personal finance planning.
4. Keep an eye out for rewards
With some borrowing facilities, you can receive rewards such as a lumpsum cashback, vouchers or air miles. These are worth keeping an eye out for but be mindful not to let this cloud your judgement…..just because it offers cashback does not make it the most affordable option.
5. Remember the AAA plan
If you are struggling with debt, then remember the AAA which stands for
– ADMIT the debt don’t hide from it – make sure you open those letters for example.
– ASSEMBLE your debts so that you have an actual summary of the amounts, the APR and the monthly repayments.
– ASK for help.
Where to turn when you need help
For generic advice The Money Advice Service (sponsored by the Government), the Citizens Advice Bureau or the National Debt Line are three organisations that you can contact if you need help.
These companies have a wealth of experience in dealing with debt. So remember – you never have to shoulder this burden alone.