How to choose the right loan for you

There are certain times when unexpected expenditure crops up and it’s useful to take out a loan to cover it. For example, if home improvements are needed, such as a loft conversion or a new conservatory, the additional funds required will add value to the house, so a low rate loan is a good investment. Similarly, a wedding in the family might mean extra money is essential and it’s wonderful to be able to plan a great day of celebrations knowing that there’s an affordable way to do so.

Types of loans

Unsecured loans are normally available for sums up to £25,000 and when deciding what is most suitable it’s important to look at the typical rates of interest and not merely the headline rates, as these are often only available to a small percentage of borrowers.

Not every lender operates in the same way of course and it’s certainly worth shopping around to find a loan that suits the circumstances and offers attractive payment options. A variable rate loan means that payments will change according to interest rates – they may go up or down every month. A fixed rate loan, on the other hand, involves monthly payments for a fixed period of time so it’s easy to budget for the regular payments. Usually, it’s not possible to pay off the loan early without incurring interest charges – normally about one month’s interest charges but sometimes equivalent to interest charges for two or three months.

A flexible loan, on the other hand, does offer the option to pay off the loan earlier if this is preferable. Overpaying the monthly amount is also an option with certain types of flexible loans. Sometimes it’s also possible to delay payments or take a ‘payment holiday’ – a break in payments for up to three months at a time. It’s best to remember that even when taking a payment holiday, however, interest on the loan will continue to accrue, so flexible loans are not always as good as they might at first appear.

How to choose the best loan

Most lenders provide a loan calculator to help customers work out their rates and it makes sense to check these out as the amount of money to be borrowed has a bearing on the cost of the loan – with larger amounts often being more advantageous in terms of repayment costs than smaller ones. Some providers offer a lower APR (typically 9.9% for example) for loans of more than £5,000, whereas smaller amounts, say £3,000, might attract an APR of 15.9%. This means it can sometimes make more sense to borrow a larger amount than is needed on a flexible loan with a smaller APR and then avoid paying any extra interest by repaying the surplus immediately.

It’s worth remembering that there is a great deal of competition among financial institutions when it comes to lending money. Banks, building societies and the Post Office have a variety of loan schemes from which customers can choose and it pays to shop around for the best low rate loans before making a decision.

How to increase income after retirement

It’s unfortunate, but many people retire only to discover they simply don’t have enough cash to survive. Whether retirement income doesn’t even make ends meet, or it’s not enough to let people enjoy a few of the finer things in life, many individuals look to supplement their pension with a little extra income. But what are the options available to those who want to earn a little extra money?

For many skilled professionals, such as nurses, medical practitioners or accountants, there are some great retirement careers to slip into. There’s a huge abundance of work for retired nurses should they want to take up a few shifts here and there, and individuals can pick and choose their hours so they’re not working full time. Home care is a popular area for retired nurses to work in, and this job can be very flexible so people are able to slot work around their leisure time. For accountants, book keeping and consulting can be an ideal career field. Individuals could find part time work with a company or set themselves up as a contractor, taking on just a few clients to keep a small stream of revenue coming in.

For those who haven’t got key career skills that they can rely on in later life, there’s no reason to worry because there are still a plethora of options available. It’s important to be innovative and think about all the areas in which work could be found. Temporary agencies can be ideal for those who don’t mind working full-time for several weeks of the year before taking time off. Alternatively, people don’t necessarily have to have one job, but might like to work at a coffee shop for a few hours one day and behind a deli-counter on another day. The important thing to remember is that people need to enjoy their retirement, so if a job gets too much, it’s vital to take the opportunity and find something new.

Working from home can be a great option for many people, and there are a great variety of options for retirees to indulge in. Craftwork has always been popular, and there are many online marketplaces, such as eBay and Etsy, where items can be sold. Baking and cooking can also be a fun way to earn money, and individuals can visit farmers’ markets or even approach local shops that might want to buy their products. Copywriters can earn a nice supplemental wage, whilst there’s also an increase in the use of virtual PA’s and administrators, allowing people to have the luxury of working from home and fitting work around leisure time. For animal lovers, looking after other people’s pets might also be perfect.

It’s extremely important for all retirees to properly investigate any work they intend to do before starting. Extra income may well exceed personal income thresholds, resulting in tax needing to be paid. However, for those wanting to supplement their pension, it’s the ideal time to get creative and find some fun ways of making cash.

A guide to expenses for your company

Company expenses cover everything that a company can deduct from their profits to help reduce their tax bill. Many business essential items, from computers and machinery through to stationary and professional memberships can be deducted pre-tax. Good financial planning is vital in business to ensure that all possible taxable allowances are taken advantage of.

Making maximum use of company expenses to reduce a tax bill should form a part of every tax avoidance scheme. Tax avoidance is not only legal but also encouraged by government. Many small businesses suffer due to poor financial management; the economy would probably benefit more if all businesses could maximise their profits.

The government provides a clear explanation of what the definition of a company expense is on the HMRC website:

“To be deductible from the earnings of an employment an expense must be incurred wholly and exclusively in the performance of the duties of the employment”.

“Wholly and exclusively” means that the items or services must only be used for work and not for a dual purpose. The example that HMRC give is that of clothing for work. While the clothing may only be worn in the workplace, it is also providing the individual with cover and comfort. For example, suits and business shoes cannot be deducted as expenses. However, protective clothing and uniforms are tax-deductible expenses.

Common expenses

Common expenses include; accountancy and professional fees (legal, IT, marketing, insurance policies etc.), advertising, business banking, car and travel expenses, stationery, phone and Internet costs, workplace rent, staff and outsourcing costs. 

Other expenses, which can be used to reduce a tax bill, include donations to charities, eye tests, business magazines, books, training manuals, printing, computers and machinery.

Claiming company expenses back

Expenses are claimed back when filing the annual tax return. For sole traders this is usually done online as part of the self-assessment tax return. For limited companies an accountant needs to be appointed and they will file the annual accounts with the non-taxable allowances included.

Available tax allowances

Every individual has several tax allowances that should always be fully used to lower the tax liability. Every person has a personal allowance, which is a tax-free portion of income. Other tax deductions are available by making use of ISA investments. Capital gains also have a tax allowance, which means the interest earned on investments is not taxable up to the tax allowance limit. 

Umbrella companies

An umbrella company can benefit companies looking to claim against all allowable expenses. Many contractors and sole traders are now partnering with umbrella companies to help manage their business. Umbrella companies provide a full financial management service for businesses, which involves processing all invoice payments, managing the bank account and paying the worker a monthly salary from the PAYE system.

Those working under an umbrella company can claim several tax allowable expenses, such as travel, personal incidental expenses (costs incurred when staying away from home), protective clothing, training, professional subscriptions and pension contributions.

It is therefore important for contractors and sole traders who operate under an umbrella structure to supply their agents with all invoices and receipts to ensure that they enjoy the maximum tax benefit.

The honest truth about logbook loans

What is a logbook loan?

A logbook loan is a loan to an individual that is secured against the trade value of the borrower’s car. The customer borrows a sum of money and the lender holds the logbook / registration certificate of the vehicle as security. If the borrower is unable to repay the loan, the lender will then have the right to cease the vehicle and sell it to pay the debt. No court order is required as the borrower is essentially giving the ownership of the car to the lender as a condition of the loan agreement.

Borrowers usually take out logbook loans because they generally have a lower interest rate than other short-term loans, such as payday loans. Lenders will also lend up to 75% of the trade value of a car.

Benefits of logbook loans

The main benefit of a logbook loan is that an individual with a poor credit rating is able to borrow money if he or she can provide security for the loan with a vehicle. It is good business for the lenders as they can be confident that they will recover their money whatever happens, and it can be good for the borrower as it can provide them with much needed short-term lending. 

Where to get logbook loans

Searching Google will reveal many companies that offer logbook loans. Logbook loans are not a new service; they have now been around for about 10 years.

There are companies online that provide comparison services for the different loan providers, showing the minimum and maximum loan possible, the annual APR and the representative APR.

What is involved?

Acquiring a logbook loan is very straightforward. The car is valued, often by using an industry guide, such as Parker’s or Glass’ guides. The loan will usually be limited to a percentage of the lowest likely trade price. If the vehicle has any finance outstanding this will be deducted from the loan amount.

In exchange for the agreed loan the borrower hands over the V5 logbook (vehicle registration certificate) to the lender so that they can change ownership of the vehicle if the loan is not repaid as agreed. Technically the lender owns the car from the point of the agreement. So long as the borrower can repay each loan instalment, usually a weekly payment, they will continue to have full use of their car.

Most companies set some strict criteria before lending. Vehicles must be currently taxed, have a MOT test certificate and insurance. Borrowers must also be able to prove that they have a steady income and are able to repay the loan. 

Logbook loans can be risky for borrowers. If cash flow does not improve there is a serious risk of losing a car and the price for the car will be likely to only cover the capital loan amount. By the time a few instalments have been missed interest will have increased, and it will be unlikely that the borrower will see any cash back from the sale of the vehicle.

These loans are really only suitable for those who need some money for just one month. For example, a loan of £2000 will be repayable at around £2200 after one month. Over a longer period the interest rate will result in much higher payments. A loan of £1000 will generally cost around £4000 over a year. It is a very expensive way to borrow.

Currently there is a lack of regulation in the industry and many people have lost their vehicles when they thought they had in fact repaid the loan. The Money Saving Expert forum has countless cases of people borrowing money for one month, repaying in full, only to be told that they missed a payment and that bailiffs were seizing the car. The only option for the borrower is to fight the company in court, at their own cost, to recover their vehicle.

Logbook loans are a good choice if you have a reliable income and can be sure to repay the loan in full, and not miss any weekly payments. If you cannot afford to lose your car and your cash flow is unreliable, logbook loans are not an option. Sole traders that rely on their vehicle for work should never take out a logbook loan.