Friday, March 24, 2017

How To Pay For Those Big Purchases

It’s always daunting when you have to lay out a large amount of money in one go. Especially if it's your first time making such a large purchase. Unfortunately, when this much money is involved, the stakes are high. You’re at risk from debt, dodgy loans, and even bankruptcy if you don’t do your homework prior to making a big purchase. Here’s a guide to the various ways you can pay for those big purchases. Whether it’s a holiday, your first home, or your first car, take a look at these simple suggestions to get to grips with the buying process…

Loans: The Pros and Cons

Taking out a loan is one way for paying for your holiday, new home, or a new car. People usually like to do this if they don’t have the cash upfront at the time of buying, but will have it coming in later. Obviously, the great thing about a loan is that you can borrow money almost instantly in most cases. Meaning you can book your holiday or put a deposit down as soon as you like.

If you’re taking out a personal loan from a bank you need to have a good credit rating, otherwise, they won’t lend you any money. Personal loans can be a good way to go as the interest rate is usually set at a fixed amount and you can repay the loan over a larger period of time in smaller instalments. This is one of the negatives about taking out a loan, the interest. Wherever you borrow from, a bank or a lender, you will have to pay interest. So in effect, you will be spending more than you would have been, to begin with.

Paying A Deposit: The Pros and Cons

Paying a deposit is, in essence, paying part of the value of your purchase. Deposits are used to secure purchases. The amount of deposit you have to pay depends on what you’re buying. If you’re booking hotel rooms the hotel may ask for a 20% deposit upfront, which isn’t refundable if you make a cancellation. This is so they don’t lose too much money if you pull out last minute. A deposit for a car can be thousands of pounds and means you can drive away with it. You do however have to pay back the rest of the value in fixed installments. Similarly buying a house usually involves putting down a deposit of around 10%. The remaining price is then calculated into installments that must be paid over the years. You can get some great tips for first time home buyers from a financial advisor. They will be able to ascertain how much deposit you can realistically afford to pay.

Deposits are a good way of securing a purchase and taking it ‘off the market.’ They allow a buyer to pay for their purchase in more manageable amounts rather than a big chunk. The problem with deposits is that it allows people to buy things they really can’t afford. Just because you can just about scrape together a deposit, doesn’t mean you can afford the repayments.

Saving Money: Pros and Cons

Good old fashioned saving up is a good option for some. The downside is that it can take a long time, and you may never be able to afford some larger purchases without help. The massive positive is that whatever you do buy will be yours outright. You won’t owe any money or have to pay any installments.
Big purchases definitely affects ones financial capabilities. Some purchases are unavoidable and one must decide well on how he can pay for it. Weighing all the options is the best and do what works well for you!

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