Many borrowers will worry about interest rate increases causing problems for them. If you are just managing to make your repayments then you could find that any increase in interest rates could be a worry for you. There are ways though, that you can avoid the stress of an increase in interest rates and there might be certain types of loans which can help you in this situation and other things that you might be able to do as well.
What influences rate changes?
There are several things that will influence whether the rate of interest changes. The main influence is the Bank of England. They have a base rate of interest which is the rate that the banks borrow form them at. If they change this, then it will make it cheaper or dearer for banks to borrow and they will reflect this change in how much they will then charge you. However, you may have a loan with a fixed interest rate and this will mean that you will not be affected by a base rate change during the term of the loan. However, a loan with a variable interest rate may change when the base rate changes. Lenders tend to put up their rates as soon as base rates rise but they may be slower to reduce rates if the base rate goes down. They may also put up their rates when the base rate does not go up if they wish to.
Choosing the right loan type
If you choose a loan with a fixed rate of interest, then this can help you to be protected against rate changes. Loans such as payday loans will have a fixed rate of interest and this will mean that if the Bank of England change the base rate there will be no change in interest rate on that particular loan type. A lot of people will choose that specific type of loan so that they can avoid the rate changes. There are different types of fixed rate loan and that means that depending on what you need the money for and how much money you have, you should be able to find one that will suit you.
Ensuring you have a plan for repaying
It may be too late for you to pick a fixed rate loan, if you already have a variable one or you may find that there is just not a fixed rate loan that fits in with your borrowing requirements. If this is the case then you may need to come up with other ideas with regards to borrowing, to make sure that you will be able to continue to make your loan repayments if the rates do go up. You will be able to select from a variety of things and it may be worth considering ding several anyway. In fact, you might want to consider doing some of them even if the rates do not go up as they could help you to more easily repay what you owe.
- Swap to a cheaper lender – There are big differences between some lenders with regards to how much they charge for their products. This means that you might be able to find one that is cheaper than the one you are using. It is worth taking a look to see whether you can swap to a cheaper one or even better to choose a cheap on from the beginning. Of course, it is worth trying to find out why they are so cheap and ensure that you are still getting good value for money despite the fact that it is so cheap.
- Pay less for other things you buy– we buy a lot of different things and it might be possible to cut down on how much we are paying or some of those things. This means that you should take a look at everything you buy, including insurance, utilities and things like that and see whether you can pay less. It might be that you will be able to swap that provider that you are using or go to different retailers and pay less.
- Buy less things – many of us buy more than we really need and this can mean that we can cut down if we need the money elsewhere. It is always worth thinking about whether we really need the things that we are buying and deciding if we can cut back in certain areas so that we can save ourselves money.
- Sell things – it is possible that we may have things that we no longer use or need and we can sell them to make some extra money. This can generate a useful lump sum of money, but it can be difficult to get a constant income from doing this. However, if you are struggling to make ends meet or want to pay off a chunk of money that you owe, then it can be useful for this.
- Make money from your home– if you own your home, then it might be possible to make money form it, with your mortgage providers and insurance companies permission. You may be able to take on a lodger or run it as a B&B or you could rent out a garage, loft or driveway to get some income. There are different options that you could consider which should help you to generate some money.
- Work more hours– it can be really helpful if you manage to work some extra hours. Extra income coming in can make a really big difference. Therefore, whether you try to take on more hours in your current job or look for other work this can be useful.