The pandemic has changed the way we functioned and lived. It has challenged the basic idea of financial independence. Nearly every country has reopened their economies, however, household financial concerns are expected to continue gaining momentum. A recent study has revealed that a quarter of parents in the UK have been forced to borrow money from their children’s savings to manage expenses. This article will highlight the major financial challenges and how to overcome them swiftly.⭐Personal Finance ⭐COVID-19
Since the pandemic, we have tossed and turned a lot to accommodate ourselves according to the situations. Personal finance has been the most affected area of our lives. Wage cut, sudden loss of jobs, adopting to a confined lifestyle – these all have been a burden on us. Coping up during this unprecedented time has been daunting. However, during these trying times, Britain has emerged as a nation of savers. Reportedly, Britons were expected to save a total of £4.6 bn every week during the lockdown. Also, households in the UK managed to pay off record £7.4 bn in credit card and personal loan debt. So, if things were working well, what led parents to use borrow money from their children’s savings?
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Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.
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Norwich Trust
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Representative Example: £12,000 over 66 months, 31.9% APR fixed. Monthly payment £358.22 Annual interest rate 28.01% fixed. Interest payable £11,642.52. Total repayable £23,642.52.
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Representative Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable. Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15. This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00
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1Plus1 Guarantor Loans
Loan Amount
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Representative APR
39.90%
Minimum Age
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Representative Example: Borrowing £3000 over 36 months with a representative APR of 39.9% (variable),the amount payable would be £134.21 a month,with a total cost of credit of £1831.56 and a total amount payable of £4831.56.
10 Factors that led parents to borrow money from their children’s savings
New research from Direct Line Life Insurance has revealed that families have been manoeuvred to use their children’s savings. Nearly 750,000 jobs have been shed putting households out of work. Loss in jobs, wage cuts and have made parents raid their kids’ savings to the tune of £2.75 billion.
The survey further revealed that an average of £17 million a day was taken out by the parents and the figure may surge. The top 3 reasons that made parents lookout for ways to make ends meet are food costs, utility bills, and childcare costs. The parents who were interviewed said that they didn’t have any other option left to borrow money.
| Influencing Factors/Reasons | Percentage of Parents who Need to Use Money for this | Number of Parents who Need to Use Money for this |
|---|---|---|
| Food Costs | 29% | 2.48 million |
| Utility Bills | 27% | 2.32 million |
| Childcare Costs | 27% | 2.26 million |
| Clothing | 21% | 1.79 million |
| Travel Costs | 20% | 1.63 million |
| Property & Maintenance Costs | 19% | 1.58 million |
| Paying for a Pet | 15% | 1.29 million |
| Council Tax Payments | 14% | 1.21 million |
| Debt Payments | 12% | 1.05 million |
| Rent or Mortgage Payments | 12% | 1.03 million |
3 ways to manage your finances during COVID-19
9.5 million people are on furlough and many small businesses have been disrupted by the ongoing crisis. The government introduced various schemes and plans to support the livelihoods. Whether your income has been uninterrupted or you are on furlough, maintaining and managing your finances during this time is essential.
Rather than robbing the future of your children, there are a variety of ways you can stop yourself from doing that. Listed below are 3 ways to help you manage your expenses during COVID-19.
a) Saving on non-essentials
You must have heard or read about cutting back on non-essentials since the lockdown began. This is a great way to save a significant amount of money. As we are not aware of the future beholds, it will be wise to spend money only on things that you need. Although the economy has started showing some signs of revival, it will take a long time before things are back to normal and jobs are restored.
b) Have a budget
Having a budget has hurt no one ever. A budget keeps you from spending unnecessarily and yet it is the most overlooked area of personal finance. Draft a monthly budget and stick to it to maintain the cash flow. A lot of people have a notion that a budget restricts you from spending money. However, a budget makes your finance healthier by keeping a track of your expenses. Review your budget against the expenses that you have made to find out areas where you can cut down.
c) Build a safety net
This is the most important part of your finance. Without savings, you will have no option to fall back on when you face an emergency. Build a savings pot and contribute towards it regularly. People who had savings found it easier to cope up with the sudden loss of their jobs.
What is the alternative to borrowing money from children’s savings account?
We need to understand that parents are not dipping into their children’s savings unnecessarily. Rather they are “forced” to do so given the current scenario of unemployment and wage cuts. So, do parents have any other option that they can consider? If yes, how feasible is that option?
Let us talk about how personal loans can help you at the time of this crisis and whether you should be borrowing a personal loan during a crisis?
Personal Loans
- This financial product is considered as a saviour in times of need. It doesn’t require you to offer any collateral and also, you can borrow a loan amount as low as £1,000. The flexible repayment period allows a borrower to make the payments in instalments. So, unlike a credit card, you do not have to pay back in a single shot. The cost of repayment can be easily spread over a minimum of 12 months.
But is it worth taking out a personal loan during a pandemic?
- The economy will contract if there is no consumer spending. This further widens employment losses, a decline in wages and cuts in salary and leads to a downward trend. To stimulate consumer spending, the government revealed numerous benefits in its March budget and the July Summer Speech. This included VAT cuts for the leisure and hospitality industries, reducing the stamp duty rate for home sales, an arrangement for eco homes to subsidize the cost of double glazing, insulation and energy-efficient heating, as well as an increase in incentives for the purchase of electric cars.
- So, if you can afford to borrow a loan, it could help to revive the economy. Ensure that you are comfortable paying back the monthly loan amount without any trouble. If you miss or stop making repayments, your credit score will be damaged. This will further cripple your chances of getting a loan or any other financial product in the future.
How LoanTube can help you?
- LoanTube is a broker and not a lender. Our job is to bring borrowers and lenders to a single platform. We are unique as we provide you with a loan comparison platform on a real-time basis. What does that mean? That means you can do the rate shopping for loans and know exactly what you will be paying if you choose to deal with a particular lender.
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- After you submit the loan application, our smart system will send it to the lenders that we have on board. The lenders will assess your loan application and quote a rate at which they can lend you money. Within a matter of seconds, you will find a list of the lenders and their quotes. Here we come. The rates that you will be offered will not change as your loan application will be thoroughly assessed by the lenders before giving out their decisions. Simply put, we provide a rate lock guarantee.
- If you don’t invest time to shop around for the right loan rate, particularly now, during this pandemic when we’re having record interest rates, there’s a decent risk that you’ll end up paying more than you deserve for borrowing money. Therefore, ensure that you compare the rates before making any decision that involves money.
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