If you’re struggling to make ends meet, it’s only natural to turn to friends and family members for help by asking to borrow money. In fact, one TikTok user has gone viral as she revealed she now shares a bank account – with a friend.

But is it ever wise to lend or borrow money in this way? We explore the benefits and (very serious) pitfalls of unofficial lending, as well as provide some tips on how you can make sure both you and your friend or family member is protected if something goes wrong.

Read on to find out more, or click on the links below to go straight to that section.

• How much do people lend?
• The advantages of lending and borrowing among friends and family
• The cons – and the con artists
• What about shared bank accounts with friends?
• The legalities – and resources that can help
• Other assistance that is available

How Much Do People Lend?

Lending money to friends and family is more common than you might think. A third of people in the UK are currently owed money by friends and family, according to research by Starling Bank.

The amount being lent out by friends and family is not small change, either – 35% have lent more than £500 according to the survey of 2,000 UK adults.

Nearly one in four (23%) are owed more than £1,000, 10% have handed over £5,000 or more, and 6% have lent upwards of £10,000.

The Advantages 

Broaching the subject of gifting or loaning money to family may be embarrassing, but according to a recent survey of 3,000 people by Hodge Bank, many people actually get a kick out of helping their friends and family with money, with 58% of over-75s saying they liked to lend their loved ones money.

Of course, you don’t have to be a financial wizard to work out why people might want to borrow money from the ‘Bank of Grandma and Grandad’ (or the ‘Bank of Bob from Work’, for example).

Clearly, your friends and family are a lot more likely to give you some help towards bills than a bank ever is. Getting a loan is a bureaucratic nightmare, and unless a bank is confident that it will easily recoup its money, it’s not going to lend you a penny.

This preference for wealthier clients by the big banks is why those who are struggling often have to turn to ‘pay day’ loans, or even loan sharks.

Of course, if you aren’t considered a risk by the banks, they’ll happily give you a loan at a far more-reasonable rate than a rapacious pay day loan provider. But the terms are still unlikely to be anywhere near as generous as you’d get from friends and family.

Exorbitant rates

According to MoneyNerd, the average interest rate on a personal loan taken out in October 2022 with a two-year repayment was 10.16%, although many lenders charge much more, with rates as high as 36% or above.

The amount you are charged will depend on a number of factors, including your personal credit score, and your collateral (i.e. the amount of money/property the bank could theoretically seize if you fail to keep up with installments).

For help working out how much money you could realistically hope to borrow through official channels, see here.

The Cons – and the Con Artists

Needless to say, lending or borrowing money from friends and relatives isn’t without risks – for both parties.

Most ‘lenders’ are not particularly wealthy, according to Starling Bank, whose study found that a third of people who have lent money to friends and family are low-earners (i.e. on an annual salary of less than £20,000), while only 11% are higher earners, on £70,000 plus.

Embarrassment and anxiety

What’s more, two thirds of lenders told the bank that they felt either too “awkward and embarrassed” or too “anxious” to ask for money back that they’re rightfully owed, while a third of respondents (32%) said they had to ask two or more times for the money to repaid.

As Starling Bank’s chief banking officer, Helen Bieton, pointed out: “Talking about money with friends and family can be awkward, but letting debts rack up can take a toll on relationships and our own financial wellbeing.”

She added that “nearly one in five (17%) started to resent their debtors and 11% avoided making plans with them in the future”.

“When they weren’t paid back as swiftly as they would have liked, more than a quarter of people in the UK (27%) got annoyed, 8% got angry or had an argument with the person who owes them [money], and 3% ended up in a physical fight.”

Difficulties saying “no”

Of course, the easiest way to avoid such potential disputes is to just say no. However, this is easier said than done.

In July, a study from the short-term lending service Moneyboat revealed that the average Briton loses over £500 a year due to this inability to assert themselves with friends and family.

As Elizabeth Richie, a psychotherapeutic counsellor at St Andrews Healthcare, explained: “Expectations from friends and family can blur the lines when we want to say no! This may include fear of being judged, fear of being selfish.”

Richie, who helped Moneyboat with the study, said that it is crucial to set boundaries and be mindful of the fact that “we cannot control other people’s responses to us”.

“The ability or inability to say no often stems from our childhood. We will struggle to say no when we are constantly seeking approval, we will find it easier to say no when we have experienced healthy attachments in early life and have acquired a healthy identity from our early caregivers.

“Ultimately being able to say no at the right time reduces stress levels, and gives you time to prioritise what is important for you and to be more discerning about your own needs and self-care without feeling bad.”

Could your friend be a loan shark?

There are, however, far greater risks involved with casual borrowing than just hurt feelings, as Jackie Spencer, the senior policy manager at the Money and Pensions Service, explained: “Another thing to be cautious about is borrowing money from someone you know casually, such as a colleague or a friend.

“It might seem like a good solution, but you should consider how much you really know them, as they might be a loan shark who lends money illegally and the loan could cost you more than you think.

“They target people who need to borrow money and can’t access it from legal sources and may resort to intimidation and even violence if you can’t keep up with repayments.”

To help prevent this, she stressed that any informal loan should be put in writing, and recommended people read this guide on how to spot a potential loan shark.

Other issues to consider

While it can be tempting to ask friends or relatives to lend you money, you need to think about not only whether you can afford to repay the loan but what might happen if you can’t.

People thinking of borrowing from friends and family really ought to draw up a budget using a resource like this, just like someone would do before approaching a bank for a loan.

“This will help you see how much money you have left for repayments and if you can actually afford it,” said Spencer.

“You should also consider the risk that this could harm or even end the relationship if the money is not repaid. It’s stressful enough if you can’t afford to pay back what you owe, but it can be even worse when you’re leaving a loved one out of pocket.

“If you’re not sure whether you should borrow from a friend or family member, there are other credit options – even if you have a poor credit rating and if you’re struggling with debts, there is help available through our MoneyHelper service.”

What to do if you are approached for a loan you can’t afford

It can be hard to refuse when a friend, partner or family member asks for financial help, but you should consider whether you can cope with the impact of not having the loan repaid. Take the time to work out your own budget before lending to anyone.

If your money is currently in savings, you’ll need to bear in mind that removing a large chunk of this will affect the interest you make each month.

What About Shared Bank Accounts with Friends?

As the cost of living hits us all, more and more people are considering setting up shared bank accounts with friends. Much like in a couple, they pay in part of their salary each month and use it to pay bills if they live together, or to save towards a shared goal like a holiday. So, instead of lending each other money back and forth (we’ve all asked for an extra tenner here and there from our best mate), their spending comes from the shared account.

A new viral trend on TikTok, shared bank accounts are being touted as a way to find accountability in your spending, as someone else can see everything you spend.

While sharing a bank account for housemates to pay bills together might be useful, it comes with big pitfalls. The funds aren’t protected – so anyone named on the account can take the whole lot at any time. In the example of TikTokker Caitlin above, she and her friend don’t always pay in equal amounts either, as sometimes one earns more than the other. This is the highest level of trust, because anyone in this situation could run off with the money they haven’t earned!

More than that, if your friend has a terrible credit score, or they put your joint account into debt, your credit rating will be ruined, too.

Joint savings accounts can work better and some banks recognise this. Monzo has a shared saving account that helps friends save together into one pot for a specific event like a holiday or hen do. However, the funds are still there for anyone to spend and your credit rating is now linked to the people named on the account.

If you want an accountability buddy to help control your spending in tight times, you could always set a weekly date to meet with your friend and go through your bank statements together. This will make sure you know someone else is going to look at your spending, helping you to curb impulse and unnecessary expenditure, without risking your funds being withdrawn by someone else.

The Legalities – and Resources That Can Help

If you are able to help a friend or relative in need, it’s still wise to take some legal precautions to safeguard both you and your loved one in case of unforeseen circumstances.

As Spencer from the Money and Pensions Service pointed out, it’s a good idea to put your agreement in writing so both parties were aware of exactly how much will repaid and when. “It’s also important to keep records of when repayments are made, so you both know how much is still outstanding.

“Having an agreement in place can protect you in unforeseen circumstances as well, such as if the borrower died with the debt unpaid as you’d need proof to claim from their estate.”

Legal templates

You can find lots of free template agreements online that both parties can sign and keep.

LawDepot has a very easy-to-follow, one-page form that should leave both sides in no doubts as to what was lent, and to whom. You can download it here.

Things to consider in any agreement 

The team at Hodge Bank has some great advice on things to consider before lending to friends and family. For instance, they suggest you should include details such as “a time frame for when the sum is expected to be paid back by, any interest (if applicable) and any consequences for missed payments – you may choose to set a fixed penalty or an interest charge for example.”

The bank also tells would-be lenders to consider things like collateral, adding: “If your friend or family member has anything of worth, this can be a good way to ensure your money will be returned to you.

“If your money was in savings prior to the loan, it may be a good idea to charge at least as much interest as it’d earn in savings to make sure that you don’t lose out. This will also ensure that the loan is seen as a loan and not a gift.”

Tax implications

Another issue many people overlook is the tax implication. If there’s interest being added to the repayment amount, you really ought to inform HMRC and fill out a self-assessment form as, depending on your income, the interest on any repayments may be liable for tax. Obviously, if you’re not charging interest, you won’t need to tell HMRC and, instead, just need to keep a detail of the loan and repayment amounts, in case you’re challenged about where the money came from.

Of course, it’s worth pointing out that many relatives (especially older ones) loan out money on the understanding that they probably won’t need it to be repaid.

It’s worth pointing out, however, that if the lender dies within seven years of giving the money away, the recipient may have to pay inheritance tax on it. For more information about inheritance tax, read our guide on estate planning.

What to do if there’s a dispute 

When lending to family and friends, there’s always the chance that they might not pay you back. If this happens, the first step is to talk to them and find out why this is. It may be due to something simple like a change in personal circumstances or other reasons beyond their control.

If the issue is due to a lack of funds, you should try to come to an agreement to amend the payment schedule or increase the length of the loan-period. If your friend or family member is being difficult and there’s a signed agreement in place, you can always seek legal action, if necessary.

For sums below £5,000, you have the option of taking the issue to a small claims court. For larger amounts, you may need to seek legal advice on how best to proceed.

Other help out there

If you or your loved ones are struggling financially, you really should try to reduce any debts and do everything you can to consolidate your finances before complicating the situation with yet more IOUs.

Charities like Christians Against Poverty give free help and advice to people struggling to keep their head above water financially – irrespective of their religion.

Its advisers should be able to help you cut your budget and get lenders off your back.

They work very closely with local Council Tax and Business Rates’ enforcement departments to create more-manageable payment plans for people who’ve fallen behind and are racking up court fees and penalty notices.

They also help arrange Individual Voluntary Arrangements, Protected Trust Deeds and Debt Relief Orders to clear any money you owe private businesses.

The charity has helped more than 20,000 become debt-free since 2010 alone, so they know what they’re doing.

You could also try Citizens Advice or Turn2us, who can not only provide some advice on clearing debts and dealing with angry lenders, but could also point you in the direction of benefits or other assistance you may not know you are eligible for.

More information

If you are struggling during the current cost-of-living crisis, you may find the following articles of use:

• 9 quick ways to organise your finances
• Mental health and money: How to stop debt overwhelming you

MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of lending or borrowing money should conduct their own due diligence. 

The post Is it wise to lend or borrow money from friends and family? appeared first on MoneyMagpie.

Loans are hard to get if your credit score isn’t perfect. Many of the best credit card deals that we mention are also not available to you if you don’t have the best credit record. But fear not! Even if you have a credit record that makes you want to weep, there are ways of cleaning it up over time.

• What affects your credit file?
• 10 easy ways to improve your credit record
• Should you pay to access your credit file?

What Affects Your Credit File?

• If you have been rejected for a credit application in recent weeks.
• Several applications for credit and loans at the same time make you look like you’re in a desperate financial situation.
• County Court Judgments (CCJs) against you.
• You’ve regularly been delayed with mortgage or loan payments.
• If you miss a payment on your phone or broadband bill, this is considered a big black mark.
• Your age affects your points score. Too young can be as bad as being too old.
• If you’re single it can be a problem – being married gives the impression that you’re stable and have a potential second income to rely on.
• Moving address every year or two. Financial companies like at least three years at the same address.
• If you are not on the electoral roll you can be rejected.

15 easy ways to improve your credit record

1. Make sure you are on the electoral roll

There are two electorial registers: public and private. You can opt out of the public register (and we usually suggest you do to avoid spam). You cannot opt out of the private register – this is what local councils use for elections etc. You can only be contacted from the private register for things of public interest, like a General Election.

Contact your local authority to request to be put on the electoral roll. If you’re already registered, it won’t hurt to have your information updated anyway!

2. Pay bills on time

Every missed payment knocks off points on your credit file.

If you cannot pay on time, contact the supplier, credit card provider, or bank as soon as possible to discuss what options are available to you. You may be able to change your repayment schedule, or make a minimum repayment instead.

3. Check your credit record for CCJs

Check your credit record through the credit reference agencies like Experian. Make a note of any unusual activity that you don’t recognise and contact the credit agencies to investigate.

Most importantly, check for County Court Judgements (CCJs). These can be issued and missed if you’ve recently moved house, for example, and didn’t receive the summons. It’s really detrimental to your score, so resolve this as soon as you can.

4. Check any resolved bankruptcies

If you’ve paid off your debts or have been discharged from your bankruptcy, check your record with Experian, TransUnion (formerly Call Credit), and Equifax. Settled or discharged debts can take up to four months to show on your record – if they aren’t listed after that time, contact the credit agencies and the lender.

5. Look at closed accounts as well as open ones

Any line of credit – even a mobile phone bill – that you’ve paid off should show as closed and settled on your credit record. If it’s not showing as settled – or worse, as a default – contact the lender or organisation immediately to sort it.

6. Work on building your credit history

Companies such as *Creditspring offer affordable ways to borrow and increase your credit score. Whilst rebuilding your credit score can seem complicated, Creditspring offer a set repayment plan (much like a subscription), with each repayment made on time increasing your score.

7. Let your rent improve your credit

Tenants can use Credit Ladder to prove they’re responsible to lenders. It’s a free service for tenants to use, too. You pay your monthly rent via Credit Ladder. They report each month to credit reference agencies that your rent – a large sum – has been repaid in full, on time. Over time, this rebuilds your score as a responsible borrower.

8. Use a credit improver

Similar to using your rent – an everyday expense – to rebuild your credit, you can use small savings to help, too. A credit improver service like Loqbox gives you a small loan.

You don’t get the cash, though! It’s locked into an account for you. Every month, you make agreed ‘repayments’ to this loan. At the end of it, the money you paid is released into a new bank account for you. It’s a great two-fer: you get to rebuild your credit score AND finish up with savings!

9. Stop at the first rejection

If you’re rejected for any type of credit or bank account, STOP! Research your credit record with each of the three credit reference agencies. Don’t just keep applying, assuming you made a mistake on the form. Multiple rejections in a short space of time can take YEARS to knock off your credit record – so avoid it at all costs!

10. Seek help for debt ASAP

If you’re already spiralling into debt, don’t apply for credit. Especially avoid things like payday loans – they’re expensive and look really bad to lenders looking at your credit record. Instead, take a deep breath and seek help.

Contact the National Debtline or Stepchange to talk through your finances and set up a repayment plan. You can also look up your local Community Money Advice centre for help, too. Jasmine is a patron of this financial education charity: they’ll help you manage your debts and finances and help you get back on track.

Should you pay to access your credit report?

 

 

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The post 15 Easy Ways to Improve Your Credit Score appeared first on MoneyMagpie.

Updated 5th April 2024

Your credit record could be affecting your ability to get a loan, credit card, mortgage, or even bank account. If you’ve been struggling to get mobile phone contracts, loans, credit cards or any other kind of borrowing, you might need to clean up your credit record.

Here’s how to find out if your rejections for credit applications are caused by a marked credit report – and how to rectify the issue.

• Find out what’s on your credit record for free 
• Why you should be checking your credit report
• Understanding your credit score
• How to clean up your credit record
• Go for a credit card for people who want to strengthen their credit rating
• Not eligible for a credit card? Try these tips
• Keep checking your credit score

1. Missed repayments on a credit card or loan (also called a default)
2. Fraud – someone has taken out credit and run up debt in your name
3. Inaccurate income records
4. A recent house move – it takes a while for the electoral register to update
5. No credit history (frustratingly, it’s easier to get credit once you’ve already got some!)
6. Too many credit applications in a short space of time (this makes you look like a risky customer)
7. You have recently opened several lines of credit or applied for several bank accounts (especially those with overdrafts)
8. Using a high percentage of your total available credit (it is best to keep under 70%)
9. Your credit card limit has been decreased
10. Conversely, being too good at paying off your loans and keeping a credit card ‘for emergencies’ only!
11. You have recently closed a credit card or paid off a loan in full

Why You Should Check Your Credit Report

Checking your credit record lets you correct any mistakes or anything you think isn’t an accurate reflection of your overall financial situation.

What You Can Do With Your Credit Record

1. If you see ‘bad marks’ from certain companies, you can contact them directly and make your case for wiping the fault from your file.
2. If you don’t find them very receptive and you’ve got a good case, you can complain to the Financial Ombudsman (which acts as an independent referee of the financial sector).
3. Alternatively, you can add a Notice of Correction – a 200-word statement you can add to any entry on your credit record, explaining the situation. For example, if you missed a few payments on your credit card a couple of months back due to illness, ordinarily the bigger story doesn’t appear – just the cold, hard facts that contribute to your bad record. So, an explanation of why payments were missed may influence a lender’s decision to offer you money.
4. With fraud and identity theft on the rise, it’s possible that someone else created a credit problem for you somewhere along the line. Checking your file could alert you to someone having stolen your identity without you knowing. If that’s the case, get the situation sorted and add a note to your file.

Understanding Your Credit Score

The higher your credit score, the better are your chances of being lent money.

The trouble is, that means you have to already have credit and be good at using it (by using a reasonable amount of your available credit and repaying bills in full) to get more.

To remove some of the mystery surrounding credit scoring, Experian have revealed to us their ‘credit scoring test’ system.

It’s worth having a look at it even if you’re looking at your report through another company – theirs will be similar.

What Do The Credit Score Numbers Mean?

Different credit agencies have different levels of ‘good’ and ‘bad’ scores. That’s why it’s important to check all three agencies.

The Experian Credit Score runs from 0 to 999 and is an indication of how a lender may see you based on the information in your Credit Report. The higher your score, the greater chance you have of getting the best credit deals.

• Very Poor = 0 to 560
• Poor = 561 to 720
• Fair = 721 to 880
• Good = 881 to 960
• Excellent = 961 to 999

The Equifax credit score goes up to 850.

Poor = 300 – 579
Fair = 580 – 669
Good = 670 – 739
Very good = 740 – 799
Excellent = 800 – 50

And finally, the Transunion credit score thresholds:

Very Poor = 300 – 600
Poor = 601 – 660
Fair = 661 – 720
Good = 721 – 780
Excellent = 781 – 850

So, if you have a credit score of 700, you might be deemed to have a ‘poor’ score through Experian, ‘good’ for Equifax, or ‘fair’ for Transunion. They each score factors differently, so bear in mind that a 700 score for one may not be 700 on another. However, this comparison should demonstrate why you need to check all three reference agencies when you’re trying to clean up your credit record.

You can also see how much the amount varies between bands, too. For example, for the Transunion boundaries, there are 300 points in the Very Poor range, and only 59 points in the Good range – so as your credit score starts to increase, it will seem like it increases faster the better it gets, as it takes less time to cross the boundary threshold.

How to Clean Up Your Credit Record

Rebuilding your credit score doesn’t happen overnight. In fact, it takes at least six months – probably more like a year – to get a better credit score. If you’ve had a serious blow to your finances, such as a lot of defaults, CCJs, or bankruptcy, it can take years to fully recoup the damage to your credit score. Starting today is the best way to improve your score as quickly as possible!

Here’s what you do:

1. The first thing to do is correct any mistakes on your report, as we mention above.
2. Also, make sure you’re on the electoral roll. Weirdly, not being on that can count against you for your credit rating. Just ring up your local council to get yourself put on it. See here why it’s so important to be on the electoral roll.
3. If you think you might have a low credit score, but you want to know how much a company would charge for a loan, ask them to do a ‘quotation search’ not a ‘credit search’. This means they will give you an idea of the interest rate they would charge but they won’t do a full credit check (and then potentially refuse you). Every time a company does a credit check on you it is recorded – particularly if they refuse you credit. This harms your credit rating.
4. That done, the main way to improve a credit record is by borrowing money and paying it back religiously, on time, every month.

Lenders look for proof that you’re capable of repaying borrowed money. “But how can I borrow if no one will lend to me?!” you wail. You do it by using one of the credit cards with very high interest rates. These exist especially for people with poor credit ratings. Then you pay the debt before the interest period kicks in. In other words, take out a credit card with a very high APR (Annual Percentage Rate), use it a small amount every month and then pay the bill every month during the interest-free period. There are a few companies that offer credit cards to people with poor credit records.

Clean Up Your Credit Record with a Rebuilder Credit Card

There are a few cards on the market now that are specifically for people who have no credit history or a bad credit history.

Remember, only use these if you know you can pay them off.

These rebuilder cards are useful for people who want to start repairing their credit score, but as that makes them risky customers in the eyes of lenders, the interest fees can be astronomical. You’ll be fine if you can pay off your usage every month in full – interest only starts to apply if you don’t pay it off each statement month.

You can use online eligibility checkers on each provider’s website to see if you might be accepted. Be careful – make sure you’re using a ‘soft search’ tool and NOT a credit check or application! A ‘soft search’ won’t affect your credit rating if you’re not eligible.

You can also call the providers to ask them to do the same. Some people, such as those with previous IVAs or bankruptcy, may not be eligible for these poor credit cards.

Vanquis (part of Provident Financial which specialises in the ‘sub-prime’ market) does a Vanquis Rebuilder Card with a typical 29.5% interest. It’s specifically aimed at people with a bad credit history (or no credit history) who can’t get other cards. Your credit limit will be between £500 – £1500 to start with, and this can grow to a maximum of £4,000 over time.

The Aqua Reward Card has an average APR of 39.4% and a starting credit limit of £250 – £1500. Aqua have been known to suddenly decrease customer credit limits without notice, which can seriously impact your credit score that you’ve worked hard to recover, so it may be worth looking at other options first. They do, however, have a strong acceptance rate for those with no credit history or a really bad history (such as bankruptcy).

Marbles is run by NewDay, which also does the Aqua card. It offers a simple credit rebuilder card with a typical APR of 34.9% and a credit limit between £250 – £1,500. You can pay online or through the app to help keep track of your spending, too.

Not Eligible for Any Credit Cards? Try This

If you’ve recently been rejected for a lot of credit cards or bank accounts, it could be that your score is too low for any provider to take a risk on you.

Don’t panic! There are some simple things you can do to start rebuilding trust in your credit score.

Sign up for a basic bank account

Most banks now offer a basic bank account. These have no overdraft facility or monthly account fees. If you’ve been made bankrupt or can’t get another type of bank account, this will start you on the journey to rebuilding your credit score. Make sure you never go overdrawn though – you’ll face hefty fees and damage your credit.

The Money Advice Service has great information about basic bank accounts to get you started.

Try LoqBox

LoqBox is essentially a loan to help you rebuild your credit. You choose an amount you KNOW you can repay each month – say £20 – and you’ll get a ‘loan’ of 12 months’ worth of that much.

This gets ‘locked’ into an account – you can’t spend the loan – and you pay off your £20 each month as promised. At the end of it, you get your money (which is essentially your savings) ‘unlocked’ – and LoqBox confirms to credit agencies that you have successfully paid back a loan.

It’s a totally free service, too – unlike some other similar ‘credit repayment’ cards. You also won’t need a credit check to apply. Your money is safe: it’s paid into a partner bank that’s covered by the Financial Services Compensation Scheme.

Loqbox is also one of the few services that let you rebuild your credit score with your rent. When you connect your bank account and let them know the date and amount of your rent payment, it keeps track and reports your rental repayments to credit agencies like Experian.

Get a Help to Save Account

If you’re on Universal Credit, you could be eligible for a Help to Save account. While this won’t clean up your credit record, it will be a way to build a nest egg while you’re getting back on financial track. Read our article about it here.

Keep Checking Your Credit Score

From CreditKarma to Experian to ClearScore, there are now several ways you can stay alert of your credit score for free. Sign up to these services to receive alerts to any changes in your score – and monthly or weekly report updates, too. You can pay for some premium features, but the free versions are usually enough to keep track of your credit rating.

The post How to clean up your credit record appeared first on MoneyMagpie.

Another day, another interest rate hike.  Say it quickly and 0.25% doesn’t sound a lot, but it’s the 14th consecutive increase since December 2021, taking the Bank of England base rate to 5.25%. This means only one thing for most of us: yet more belt tightening. 

The rationale behind raising interest rates to their highest level for 15 years is that this makes it more expensive to borrow money, therefore people have less to spend, reducing both demand and inflation. 

Prices rose by 7.9% in the year to June, according to the Office for National Statistics (ONS) which, on the plus side, was lower than the 8.7% in the year to May, and down from 11.1% in October 2022. However, it’s still four times the Bank’s 2% target.

Strong demand for workers, with more than a million unfilled vacancies, is pushing wages higher. Meanwhile, persistent food inflation and a rise in the cost of services, which has only just reached a peak, have all been a constant barrier to bringing down inflation. 

Inflation may take another two years

Andrew Bailey, Governor of the Bank of England, says it is vital that inflation falls back to 2% – something it is unlikely to do for another two years.  

Policymakers have been able to rule out fears of a recession, and with energy prices expected to fall over the rest of the year, it will bring inflation below 5%, meeting Prime Minister Rishi Sunak’s pledge to halve it from its 10.5% peak at the start of 2023. 

The UK is not alone.  Since Covid restrictions eased and consumer spending increased, inflation has shot up worldwide.  

Companies struggled to get goods to sell, and oil and gas costs rose dramatically with Russia’s invasion of Ukraine. As a result, interest rates increased for everyone. But the UK now has the highest rate in the G7, a group of the seven largest advanced economies, which includes Canada, France, Germany, Italy, Japan and the USA. 

What do all these figures add up to for people in the UK? 

Mortgages

A third of households have a mortgage and with 1.4 million people on tracker or standard variable rate (SVR) deals, they will see an immediate increase in their monthly payments. The 0.25% rise will add an extra £24 a month to the average tracker while an SVR will face a £15 jump. 

Three quarters of mortgage customers hold fixed-rate deals and while their monthly rates won’t change immediately, higher interest rates mean house-buyers, or the 1.8 million people expected to remortgage this year, will have to pay a lot more than if they’d taken out the same mortgage a year ago. 

An average two-year fixed deal which was 2.29% in November 2021 is now well above 6%. Dubbed the ‘mortgage bomb’ it means people have seen their monthly payments soar by hundreds of pounds, with the IFS, a politically independent think tank, warning rising interest rates could see the disposable income of 1.4 million mortgage holders fall by 20%. 

A typical mortgage holder coming to the end of a fixed-rate deal in the second half of this year will see their monthly payments rise by about £220. 

Credit cards and loans

Desperate times may call for desperate measures, but while it’s easy to turn to credit cards and loans to help you through a bad patch, their charges are also influenced by the Bank of England base rate. They were already high at 21.86% for an overdraft and 20.13% on credit cards, and lenders could put prices up even further. 

Savings

If you are fortunate enough to have savings, then an interest rate rise should be passed on to customers and enable you to make more from your hard-earned cash. 

Nationwide and HSBC were among the first providers to improve deals. Nationwide’s Triple Access Online Cash ISA will now pay 4.25% in annual interest, up from 3.5%. While HSBC is increasing rates on its Premier Savings Account by 0.25% to 2.25%. 

But it is important to shop around. While saving accounts are paying more, even those with the best interest rates aren’t keeping up with inflation. And the UK’s financial watchdog recently warned that banks will face “robust action” if they offer unjustifiably low savings rates to their customers. 

Laith Khalaf, the head of investment at A J Bell, is sceptical about the Bank of England’s high interest approach to tackle inflation. 

“Its own numbers show that more interest rate hikes will make almost no difference to inflation in the medium term, but it will inflict more pain on consumers and businesses, and in particular mortgage holders.  

“Sometimes doing nothing is the hardest approach, but there is increasing evidence that’s the path the Bank should now be following. 

“Based on their own projections, inflation will fall to 1.5% in three years’ time if the Bank hikes rates to 6% and then trims them back to 4.5%.  At the same time its forecasts say the Consumer Price Index (CPI) – the price of an average basket of consumer goods and services purchased by households – will fall to 1.4% if interest rates stay where they are.   

“So this supports a pause in rate increases, not least because the cost-of-living crisis is being exacerbated by high interest rates. The full effect of monetary policy takes around 18 to 24 months to ripple out into the economy, so a hiatus in rate activity would give the bank more time to assess the impact of its past actions.” 

Are we Seeing Rishi Sunak’s promised growth of the economy?

Rishi Sunak delivers his Spring Statement.

Rishi Sunak pledged to grow the economy as one of his five promises to the electorate when he became Prime Minister, but Bank of England projections show almost no growth in the next two years, less than 1%, according to Khalaf. 

He adds: “Price rises of 5% for consumers are still deeply uncomfortable, especially on the back of the double-digit inflation we have seen over the last year or so. Little wonder that pressure on household finances is finding its way into wage demands, which itself is stoking a second round of inflation after the energy and food price spike. 

“Meanwhile, although the housing market is on the wane, a correction rather than a crash seems most likely, even as prices have fallen at their sharpest annual rate since 2009. The one positive we can take from the UK economy is low unemployment. In the depths of the financial crisis, unemployment rose to 8%; today it sits at just 4%.”

The post Interest rates reach highest level in 15 years appeared first on MoneyMagpie.

Nick Hubble is an economist, and Editor at Fortune & Freedom, a website dedicated to helping you take back control of your finances. Their mission is to educate and inform, helping you feel in control when it comes to your money. With plenty of fresh voices and new insights into the economy and the financial systems that impact you, Fortune & Freedom is a hub of information.

So, we thought there would be no one better to get insight from about inflation in Britain, than the Editor of Fortune & Freedom himself. We sat down with Nick to get his take on what inflation is, what the impacts are, and how you can protect you money.

Don’t forget to check out the Fortune & Freedom podcast, where Nick pulls back the curtain on everything from Bitcoin to gold and Brexit to interest rates.  

• What is inflation?
• What are the impacts of inflation?
• Can lower-middle classes survive inflation?
• How long until we see lower inflation?
• How can you protect your money from inflation?
• Where is the safest place to put your money?

What is inflation?

“The idea is that prices are rising, but it gets progressively more complicated from that point on,” Says Nick. “For example, how do you measure prices? What is causing the inflation?”.

He continues, “If you go back through history, the definition of inflation has changed as well.”

“But not all prices are included in the measure of inflation,” Nick points out. “For example, house prices are not included. So it gets a bit imprecise and you can play with the statistics and the different measures for inflation.”

Watch the full video above, or watch it on our Youtube Channel.

What are the impacts of inflation?

“The impacts depend on who you are, how you earn your income, whether your income is likely to go up or down with inflation or not,” Nick explains. He goes on to explain that if you are on a fixed income, such as living off pension savings, you will suffer more as your income won’t be adjusted for inflation.

“It is important to note that some people actually benefit from inflation,” he tells us. This is an interesting point. But who benefits? “People who borrow lots of money are actually benefitting from inflation.”

Watch the clip above or go to our Youtube Channel to watch it there.

Can lower-middle classes survive inflation?

“It depends where within those social classes you are. It depends on how you invest and how you earn your money and whether you can negotiate wage increases.” Nick explains.

Nick explains some people will do better than others in these times.”There’s division in society basically now, between those who understand the problem, and who can deal with it, and those who can’t.”

He continues, “Somebody who’s got a contract that’s fixed or is earning a wage that is not going to be raised until the end of the year are really suffering, because they are falling really far behind.”

Watch the full clip above, or check it out on our Youtube channel here.

How long until we see lower inflation?

“Once [central bankers] are faced with inflation above their target, they start to tighten monetary policy and they continue to do that until there’s some sort of financial crash. Until something goes badly wrong.” Nick explains.

What happens during a crisis? Well, inflation comes down. “Everyone’s focused on the crisis, not the fact that inflation has come down!”

“On the one hand, we all want inflation to come back down, but we don’t want a financial crisis,” says Nick. “The idea that central bankers can bring inflation back down again by tightening monetary policy, without causing some sort of major crisis, somewhere, is a myth.”

What the full clip above or click here to watch it on Youtube.

How can you protect your money from inflation?

“What makes investing so difficult right now, is that you need to protect yourself from both inflation and the financial crash, and there’s no investments that do that,” Nick tells us. “Other than perhaps gold.”

“The problem with a lot of the investments that benefit from inflation is that they do really badly during a crash.” What is an example of this type of investment? “Property is a good example of that.”

On the other hand, some investments that do badly during periods of inflation may do well during a financial crash. Government bonds, for example, suggests Nick.

Watch the clip above or click here to watch it on Youtube.

Where is the safest place to put your money?

“This is an incredibly difficult question,” replies Nick. “I think gold definitely should be part of everybody’s investment portfolio, because it has that protection from both extremes – the financial crash and the inflationary side.”

Own a small business? You could do better than you expect from a financial crash. Nick explains; “Owning a small productive business that actually generates cash and has a reliable revenue stream is another good option.”

“I recommend avoiding debt as much as you can,” He continues. “Paying off debt is probably a better idea than investing right now.”

See everything Nick Hubble had to say by watching the clip or check it out on Youtube.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. 

The post What does it all mean? Economist Nick Hubble gives you the answers you need appeared first on MoneyMagpie.

We’ve all heard the mantra “New year, new you”. Usually this applies to physical health, but given the rising cost of living, many people are choosing to apply this resolution to their financial health too. 

Across the UK, 18.6 million people say rising living costs are making them feel financially unstable, and more than a third (35%) say they’re terrified for their financial future. This is a significant increase from 20% in 2021, and evidence of the damaging impact that the cost-of-living crisis is having on the finances of people around the country. 

Given the concerns people have around their finances, it’s unsurprising that many are looking to take control of their budget and invest in their long-term financial health. However, many need support to do this, and financial providers are central to providing this guidance. Not only do banks and other lenders have a responsibility to protect borrowers and lend responsibly, they should also be doing more to improve the nation’s understanding of their finances. 

With that in mind, here are five tips from responsible lender, Creditspring, that will give households a head start when it comes to managing their budgets and improving their financial health this year. 

1. Repay small amounts regularly

Repaying small amounts regularly and on time can be a valuable financial tool. 

Many people believe that lenders make decisions to provide credit to borrowers purely on credit scores – in reality, this is just one aspect that lenders consider. Once you borrow once and successfully repay the money, it becomes a lot easier to borrow again. 

Unfortunately, during the cost of living crisis many will be forced to turn to high-cost credit, but building a stronger credit file and demonstrating a repayment history can improve access to loans and allow borrowers to seek more affordable credit alternatives. 

Creditspring’s Step programme can be used to boost people’s future financial resilience and security. Step enables borrowers to gradually repay smaller loans giving them more control over their finances and, more importantly, demonstrate a record of reliable repayments that boost credit reports and can unlock new affordable credit options from mainstream lenders in future.  

2. Simple steps to build your credit file

Building a credit profile is necessary to access mainstream, affordable credit in the future, rather than relying on high-cost credit options such as payday loans – as these runs the risk of missed repayments, spiralling debt and eroding credit scores which all combine to limit future access to affordable credit. 

Start off by checking that the information on your statutory credit report is correct and ensure you’re on time with credit agreement payments, sign up to the electoral register and if possible, only borrow when you need it while accepting opportunities to boost credit limits. 

3. 
   

   Try to avoid spending beyond your means

While borrowing can be an incredibly useful financial tool, and vital in many cases, it can also be risky when not used responsibly. For the most part, it is the responsibility of the lender to ensure they’re communicating the terms and conditions of a loan clearly, and not providing people with credit they can’t afford to safely repay. 

But there are also steps that borrowers can take to make sure they’re using credit in a responsible way that won’t have a negative impact on their long-term financial health. 

For some people, it can be easy to slide into debt. For example, if they make a purchase using a buy now, pay later service, and then cannot afford to repay the instalments, they may need to borrow again to pay off the loan. It’s important to be realistic about what you can afford to repay, and try not to spend beyond your means. 

4. When borrowing, read the small print and don’t be afraid to ask!

People should always know the exact cost of borrowing. It is up to lenders to accurately communicate the true cost of borrowing but sadly this often doesn’t happen. Therefore, borrowers also need to ensure that they’re not afraid of asking challenging questions so they know how much each monthly repayment will come to. 

Unfortunately, too many lenders still need to improve transparency – offering confusing APRs or including hidden costs which can pile on extra repayments for every loan. It’s time for lenders to step up and provide more responsible credit products that protect borrowers and don’t encourage them to take on extortionate debts. 

Many people struggle to fully understand how APRs work which can result in them being unable to meet future repayments – these people might benefit from other types of lending, such as Creditspring’s subscription finance model,  where borrowers can pay a fixed monthly fee to access credit rather than escalating interest rates. 

5. 
   

   Share money worries – financial health should not be a taboo!

Almost a quarter of people wouldn’t turn to anyone for financial advice – often this is due to embarrassment or simply not knowing who to ask when struggling financially. This needs to change! People should be as comfortable discussing their financial health as they are talking about their mental or physical health. 

Talking about money worries can also play a vital role in developing your financial understanding and can open up options you didn’t know existed which could provide a financial lifeline when you need it most and help to avoid debt. 

These tips, of course, aren’t the solution to the cost-of-living crisis. But they can be helpful when it comes to taking control of your finances, and developing a better understanding of the small steps you can take to improve your financial situation, both now and for the future. 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

This article was written with Credit Spring as a sponsor. 

The post How to keep your financial health in check during 2023 appeared first on MoneyMagpie.

This is because, paradoxically people who are good and sensible and never take out loans or credit can actually be penalised for it!

Not having a ‘credit history’ (i.e. you haven’t taken out loans or credit cards) means you’re a blank piece of paper to lenders (and that includes mobile phone companies who wonder if you’re a good bet for a contract). They don’t know if they can trust you to pay it back.

Crazy, but that’s the way it is.

So, how do you build a credit score fast when you need to?

Well it depends on your definition of fast! Frankly it’s going to take a few months whatever you do, but see how you can do it in reasonable time here.

• Find out why you may not have a credit history
• Four-step guide to building a good credit history
• How to monitor your credit record for free
• What you need to know about your credit file

You may not have a credit history because…

• You’re a student and you don’t have a regular income
• You have just moved to the UK
• You have just moved back to the UK after living abroad
• You have never had a credit card or personal loan because you’re sensible and frugal!

None of this is impossible to rectify, it just takes a bit of effort on your part…

Here are the steps to building a good credit score.

1. Register on the electoral roll

If you aren’t registered to vote you’ll almost certainly be refused credit, so get yourself on the electoral roll now. Head to About My Vote, enter your postcode to find your local council and fill in the registration form online. Then all you need to do is print it off and send it to your council – simple.

2. Get your timing right

If you make multiple applications for credit within a short space of time, it’ll hurt your score. So if you’re applying for credit or even a mobile phone contract – which all require a search of your file – make sure you don’t do it all at once. And if you make an application and get rejected, don’t just keep applying elsewhere because that will damage your rating as you’re making multiple credit applications.

3. Get the right credit card

The best way to build a good credit history is really very simple – borrow small amounts of money regularly with a credit card that will take people with no credit history or a poor credit score and ALWAYS, ALWAYS pay it back in full and on time.

There’s no point in applying for fantastic credit cards which offer 0% interest deals or rewards if you have no credit history – those cards are only for people who have an excellent credit score, and remember a rejection won’t do you any favours.

Instead, if you don’t have a credit record (and, therefore, you won’t be looked at by the usual card providers) go for one of the more lenient cards.

An alternative Credit source – Creditspring

Whilst not a traditional Credit Card *Creditspring offer credit in a way that is affordable.

It has a subscription model – a fixed-cost, low-risk credit solution that gives members access to two loans per year, with clear repayments, capped costs, and no hidden charges or confusing APRs. Think Netflix for loans – you know exactly how much you’re paying, and this figure is fixed.

This model also means people know up front the cost of borrowing and, importantly, there are no late fees. It makes it simple for people to evaluate the real cost of borrowing and eliminates the risk of falling into a debt spiral.

4. Keep an eye on your credit rating

You can see your credit score for free, forever, with Experian. For just £2 you can also get your statutory credit report.

It’s worth looking at your report on a regular basis to check on your progress, particularly when you’re trying to build up a good history.

• Make sure all the information is correct and up to date.
• If you notice any old accounts or cards you don’t use, be sure to close them.
• And if you’re considering applying for a credit card or loan then double check your report just before you do it to make sure everything is as it should be.

By the way….

If you just want to have a card to use now for convenience, (maybe for buying things online) you can apply for a prepaid card, although this won’t help you develop a credit history. You can’t be refused on the grounds of your credit rating because prepaid cards don’t allow you to borrow money (and therefore don’t built up a credit history for you), and you only spend what you load onto them. We like the Kalixa Card because it has so few fees. There’s a one-off purchase fee of £6.95, and a small charge for using an ATM but other than that it’s just like using a debit card – except that you don’t need a bank account. Find out more about prepaid credit cards here.

What you need to know about your credit file

Why do I need to build a good credit history?

Because without it you’ll find it almost impossible to borrow money, get contracts ( for a mobile phone for instance) and even rent property.

Who decides what my credit rating is?

There are three credit reference agencies – Experian, Equifax and Callcredit – who collect information about you to send to any lenders. They get this information from various places like the Electoral roll, court records and financial data from banks, building societies and other organisations.

What information do they have about me?

A credit file includes personal information like name, date of birth and current and previous addresses. It also contains all the details of any accounts and contracts opened in your name – both closed and inactive – for six years from the last date of activity.

Public records like County Court Judgments (CCJs) are also likely to appear on the report (again usually for about six years).

How is this information used?

When you apply for a mortgage, overdraft, credit card, mobile phone contract, insurance policy and even to rent a property, these companies or individuals will want to see your credit file.

Remember though that your credit file is not the only thing they use to decide whether to lend to you or not – each company has its own set of criteria and all vary slightly from one another.

Why do they want to know this information?

Lenders use the information on your credit file (amongst other criteria) to assess how much of a risk you are to them and to see how much money they can make out of you.

So if the information on your credit file leads them to believe that you won’t repay your debt, they’re unlikely to let you borrow money. Equally though, if you’re never in debt and always repay everything back in full and on time you may also face rejection – because a financial institution isn’t going to make money out of you!

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The post How to build a credit score fast appeared first on MoneyMagpie.

We’ve written recently about the difficulties people face when trying to open bank accounts if they have a credit history that may traditionally count against them. Some customers have said the sheer amount of paperwork and ID required to open an account is daunting: proof of address, credit checks and a host of other documents. Your financial future can seem as if it’s out of your hands. 

Monese don’t ask for any of the above documents. All you need is an email address, phone number and an ID document – like your passport – and there are no appointments, no phone calls, no credit checks, no minimum deposits. With the aim to help build your financial future, Monese offer an instant account opening process, which part of why they’re one of the most popular financial services in Europe today.  

You can: 

• Create an online money account quickly straight from your phone 
• Bypass credit checks or documents that prove your address or a fixed income 
• Open an account for FREE with no minimum deposit 
• Protect your identity with a video selfie to verify the real you 

All that, plus a convenient mobile app for saving and sending money, and a contactless prepaid debit card to use worldwide. Monese offer financial freedom to foreign nationals, expats, freelancers and the unbanked, and you can open an online money account with them if you live in any of the 31 countries in the European Economic Area. 

NOT A BANK 

Monese are not a bank, so don’t have branches or the ability to offer traditional banking services like overdrafts and loans. They do have a multilingual support team dedicated to making your life much easier, and gaining control of your own finances without complication. 

Monese founder Norris Koppel discovered just how difficult it can be to open a bank account when he moved to the UK as a foreign national, so he was well-placed to create an app that removes as many of these barriers as possible. 

Founder of Monese: Norris Koppel

A MONESE ACCOUNT 

A Monese account is a mobile money account that allows you to spend, send and save money right from your phone. You’ll get your multi-currency account details to pay and get paid like a local, plus a contactless Mastercard debit card to use almost anywhere. Other handy features include easy cash withdrawals, great exchange rates on foreign currency spending and real-time mobile notifications. 

You can create an online money account with Monese if you’re aged 18 or over and live in one of the 31 countries in the European Economic Area (EEA). You don’t need a perfect credit score, the right utility bills or a fixed income to get started. 

You could be moving abroad to work, study or simply experience somewhere new. Maybe you can’t get a regular bank account or don’t want to. Whatever your situation, we’re here to help you save and spend money locally. And once you have a Monese personal account, you can open additional currency accounts or a joint account. 

There’s no need to visit a branch or make time for a phone call, as the process for opening a Monese instant account could have you signed up fast from the comfort of your home or on the go. 

BUILD YOUR CREDIT SCORE 

Many customers will be keen to build their credit score, perhaps after a challenging period of time, and Monese offers customers the chance to build their credit history hassle and interest-free, with no credit checks or the need to apply for a high-interest credit card, with the Monese Credit Builder, available on all plans for customers in the UK. 

*Representative APR: The loan, as a part of the Credit Builder service is a 0% interest loan, but in financial jargon the £7.95/month subscription fee relates to a 28.2% APR as that is the cost of your Credit Builder. This is based on a loan amount of £600. 

The Monese Credit Builder is set up so you can save money while building your credit history. After a year of monthly repayments on your interest-free Credit Builder loan, you’ll have 12 months of successful repayment history recorded with the credit agencies, plus 12 months of savings ready to spend. So you can rest easy knowing that your monthly repayments are reported to all three of the UK’s main credit agencies: Experian, Equifax and TransUnion, where you’ll start seeing a difference in your credit score. 

And with Monese Boost, you can choose past card transactions up to £300 to pay back in monthly instalments. This feature unlocks after your 4th Credit Builder payment, and helps grow your credit score even more quickly. 

INSURANCE COVER AND BILLS PROTECTION 

Another bonus offered by Monese is their insurance cover, which offers you built-in protection over your bills and purchases (including electronic devices) from the day you join, with the level of cover depending on which plan you choose. The best part is you don’t need to do anything extra: once you’ve signed up for one of Monese’s paid plans, your insurance cover will start today. 

If you can’t work because you’re sick, have an accident, lose your job or need to stay in hospital, you don’t need to worry about falling behind on your bills either, as Bills Protection will give you peace of mind and help you cover bills you usually pay from your Monese account. The level of cover will depend on which plan you choose, and is offered on the Classic and Premium accounts. 

GET THE APP 

Start by downloading the free Monese mobile app from the App Store, Google Play or AppGallery. Once it’s installed, all you need to open an online money account is: 

• An email address and phone number 
• An ID document, like your passport 

Once you’ve recorded your short video selfie in the app to confirm your identity, you can choose your Monese plan and tell them where to send your card: Monese do still need to verify a UK address to help them send your physical card to the right place. You can do this by granting access to your geolocation while using your Monese app.  

START USING YOUR ACCOUNT INSTANTLY 

Once you’ve gone through the instant account opening process and verified your address, you’ll have full access to your Monese account allowing you to add, receive, send and withdraw your money instantly, whenever you need to. You can even create a virtual card and connect it to Apple Pay or Google Pay for in-store and online payments while you wait for your physical card to arrive. 

Some banks need a minimum initial deposit to open an account. You can create an online money account for free with Monese then add money when you’re ready. 

There are lots of different ways to add to your balance, too: 

• Top-up from another debit card 
• Receive bank transfers using your account details 
• Transfer money between your Monese accounts 
• Get paid by your employer 
• Request money from friends 

• Top up with cash at more than 84,000 payment point locations across the UK and Europe with the Post Office, PayPoint or Paysafecash 

If you’re ordering a physical card from the Monese starter plan, this is currently free until the end of November 2022, after which time you may need to top up your account with enough money to cover the £4.95 card delivery fee. 

Monese have signed up millions of people from across 31 countries. With 70% of incoming customer money coming from salary payments, they have fast become one of the most popular and trusted financial services across Europe, and aim to improve the lives of customers that traditional banks may have failed to help. Monese help you build your financial future. 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

The post Monese: Is There An App That Can Help You Build Your Financial Future? appeared first on MoneyMagpie.

According to the National Institute for Health and Care Excellence, approximately 3% to 4% of the adult population in the UK have ADHD.² That is almost 2 million adults. Although ADHD can present itself differently in every individual, symptoms include inattentiveness, such as difficulty focusing and concentrating, and hyperactivity and impulsiveness. These traits can present in different ways. 

In this article, we will be discussing the ways in which ADHD can impact every day and life and finances.

• Finances and ADHD
• Strategies and tips
• Helpful apps

Finances and ADHD

According to CHADD, managing finances can be a challenge for people with ADHD. Symptoms such as procrastination, disorganisation and impulsivity can create problems with money.³ 

Research shows many people living with ADHD find it can have an impact on their finances. YouGov spoke to 506 people living with ADHD to understand their experiences with managing personal finances. The results were fascinating, with a number of key findings coming to light. 

The survey showed almost two-thirds (65%) of those with ADHD say the condition makes managing finances more difficult. The biggest issues they face include impulsive spending (58%), struggling to budget (51%) and struggling with money saving (49%). 

Additionally, the results showed 76% of people with ADHD are twice as likely to suffer from anxiety surrounding their personal finances, compared to just 38% of the general population. 

Similarly, those with ADHD are almost three-times more likely to struggle with debt (31%) than those who do not have the condition (11%), and are almost three times likely to miss bill payments than the general population also.⁴ 

Strategies and tips

Charity CHADD has lots of useful information and guidance for those with ADHD, especially when it comes to money management. They provide useful resources such as fact sheets which contain plenty of strategies and tips to help you with your personal finances. 

These include focusing on expenses and goals, minding your debts and saving and spending. They also offer a money management schedule to help you stick to your financial goals. 

Tracking expenses

For those with ADHD, there may be many things which are difficult to keep up with when it comes to financial matters. These may include keeping track of bank balances and your expenses, spending and large credit card balances, difficulty in organising bills and taxes and avoiding late payments.⁵ 

CHADD recommends keeping a record of what you buy to help curb impulsive spending. Perhaps you could have a notebook dedicated to writing down what you buy and when, and how much it cost. You could even write it down on your phone to add to it instantly when you are on the go. Remember to include what you buy online, also. 

It may be tedious at first to track your spending, especially when tracking very small purchases. Even if you don’t keep a record of every single purchase, or forget from time to time, you will still be able to see certain spending patterns emerge. You will also be able to note fixed expenses, such as your utility bills or home payments and separate them from your variable expenses. Variable expenses include items such as food, petrol or clothing, which range from day to day. 

Write down your goals

We all have different goals when it comes to money. You may want to save up for a particular item, or want to make sure you can save enough to cover your monthly outgoings. Whatever it is you have in mind, CHADD recommend splitting your goals into three categories: 

• Short-term goals: These include saving a certain amount per week or buying one coffee per week on your way to work, instead of one every day. 
• Mid-term goals: These could include saving for a holiday with your friends or paying off a small debt such as a mobile phone bill. 
• Long-term goals: Goals such as these could be saving into your pension pot for retirement, or saving for a house deposit. 

Break down your goals into small, manageable steps. This way, they aren’t as overwhelming and can be gradually worked on at a pace which suits you. 

Impulse spending

We have all committed an impulse-spend from time to time. Splurging on something that we can’t resist or adding something to your basket last-minute when you are standing in the queue in a shop. But for adults with ADHD, curbing these impulses can be challenging. 

CHADD offer some great tips on how to manage these impulses. Here are some of the tips they give: 

• Identify temptations: If there is a particular shop or retailer you are prone to impulse-buying from, try to avoid them where possible. 
• Add up your purchases as you shop: This helps you keep track of your spending before you get to the till. 
• Wait 24 hours before buying: If you are shopping online, give yourself 24 hours before checking out your items. You may find you no longer want the items after this time. 
• Make it harder to spend money: Leaving your credit card or debit hard at home and taking cash out with you instead can prevent you from spending more than you wish to. 

You can download the full factsheet here. 

Credit cards and debt

According to research exploring the relationship between ADHD and financial distress, adults with ADHD face more difficulties paying bills, use credit cards more compulsively, and are more likely to use very high-interest-rate borrowing, such as payday loans, than those in the general population.⁶ 

Credit card debt can easily add up, with balances building from interest and late payment fees. They may be easy to use, but credit cards can promote impulse spending, make it harder to save money and make it easier to spend more money. 

If you feel your credit spending is starting to become an issue, consider putting your credit cards in a safe place and leaving them at home when you go shopping. Similarly, have a trusted friend or loved one keep your card safe for you. You can have a conversation with them about the purchase before you get it back from them. 

You can download the full information pack here. 

Helpful apps

In this day and age, there are plenty of apps to help you complete tasks and manage your money more easily at the tip of your fingertips. The digital age has bought with it a hoard of useful tools to suit everyone. 

Here are some of the best apps to manage daily tasks and keep your finances in order. 

Remember The Milk

Remember The Milk is an innovative and easy-to-use app that was birthed in 2005 from the minds of two disorganised individuals from Australia. Tired of forgetting things – including buying milk – they created a smart to-do app for busy people. 

Simply add tasks to your to-do list, entering your tasks in one line. Super-fast and easy to add to your to-do list, you can add a deadline or due date, tick whether it is a priority task, repeat certain tasks, add tags and more. 

Adding to your list is one thing, but remembering to do the tasks is another. Luckily, you can get reminded of your tasks anywhere, including email, text, instant message an even via Twitter! If you have a smart speaker in your home, you can connect to the app and get your Alexa or Google Assistant to give you a gentle nudge. 

You can create as many lists as you want to and break your list down into subtasks to make it more manageable. Subtasks can even have their own subtasks, too! The world is your oyster.  

If you want to get your friends or family involved in order to help you stay on track, you can share your tasks and to do lists. They can remind you to complete your tasks, too. 

Remember The Milk is free, but you can upgrade to the Pro version for $39.99 AUD a year – approximately £22. 

You Need A Budget (YNAB)

You Need A Budget (YNAB) helps you take back total control for your finances in an easy way. The YNAB app uses the tag line “Stop living paycheck-to-paycheck, get out of debt and save more money”, which is a promising start. 

The app uses a four-rule method to help you organise your finances and reach your goals faster. You can assign your money to convenient digital envelopes as well allowing you to see all your money in one place. We all have multiple bank accounts, and any credit card accounts or loans can make things complicated. So being able to see everything in one central place is a huge bonus. 

You can set yourself a target and pursue your money goals. The app allows you to plan for any non-monthly bills, preventing late fees and increased payments. Plus, if you live with someone or want to budget with someone else, you can get a shared view of your finances to make every day budgeting a little easier. 

You can get a 34-day free trial of YNAB. If you decide the app isn’t for you, you can cancel your subscription no questions asked. If you find the app is useful to you, you can pay an annual fee of $99 USD (approx. £88) or pay monthly at the price of $14.99 (approx. £13.35). 

Snoop

Snoop is a free-to-use money management and budgeting app. It helps you track your spending, cut your bills and take back control of your finances. 

Snoop does exactly what it says on the tin – it snoops. It looks at all of your spending, tracks your habits and notifies you of increases and decreases in your bills and direct debits. It combines all of your bank accounts and credit cards, putting all of your information in one place. 

The app can also help you save money in more ways than one. Snoop sources discounts on a range of things, from food delivery services to finding cheaper deals for your broadband. Alongside this, Snoop sends you daily money-saving suggestions tailored to your spending habits.  

It is easy to miss things on your bills and bank statements, so Snoop highlights any anomalies or items which may require your attention. You are also given a monthly analysis of your spending, as well as an all-time analysis, allowing you to see how your spending behaviours change the more you use the app. 

Snoop is a free app, however you can upgrade to Snoop Plus for £3.99 a month, to access unlimited spending reports, spending and refund alerts. 

Goodbudget 

Goodbudget is a budget tracker which takes the envelope-saving method and brings it into the digital age. Gone are the days of having multiple envelopes scattered around stuffed with cash. You can make digital envelopes for all of your spending categories, from rent and bills to groceries and date night. It doesn’t just help you track your spending, but helps you plan your spending, too. 

You can also use the digital envelope saving method Goodbudget provides to budget for longer-term savings goals, such as saving for a house deposit or a new car. 

When you come to make a purchase, you can spend from the relevant envelope. Eating out with friends? You can take the money from the correct category. But only spending from the relevant envelope, you can quickly learn any bad habits you have when it comes to spending, and begin adjusting your everyday life to ensure you don’t overspend on a particular category. 

Goodbudget also helps you track any debts and helps you manage them more easily. You can use the app on your computer or smart phone, to track your spending on the go. You can also share your budgets with your household to ensure you are all on track and avoid awkward miscommunications. 

Goodbudget is a free to use app, however you can subscribe to Plus for £6.67 per month or £58.40 annually. 

Monefy 

Monefy is a personal finance app which allows you to more easily manage your money. It makes budgeting simple by breaking down your expenses in a simple and understandable way. It takes the guess work out of saving money and helps you identify key spending patterns to allow you to effectively save money. 

You can easily track your transactions and manually add any expenditure to your account as well as allowing you to categorise spending. The categories are carefully curated to allow ease of use and help you identify key areas of expenditure. You can even add custom categories if you can’t find what you are looking for. 

The app is free, but you can subscribe to access extra features for £49.99 per annum. 

 SOURCES:  

1. https://www.nhs.uk/conditions/attention-deficit-hyperactivity-disorder-adhd/  
2. https://cks.nice.org.uk/topics/attention-deficit-hyperactivity-disorder/background-information/prevalence/  
3. https://chadd.org/for-adults/managing-money-and-adhd/  
4. https://www.theguardian.com/money/2022/jun/25/shopping-adhd-spending-habits#:~:text=Those%20with%20ADHD%20are%20twice,the%20biggest%20issues%20they%20face.  
5. https://chadd.org/for-adults/managing-money-and-adhd-expenses-and-goals/ 
6. https://www.science.org/doi/full/10.1126/sciadv.aba1551  

The post The relationship between ADHD and money appeared first on MoneyMagpie.

Here’s a small checklist to see if you’ve borrowed from a loan shark: 

• Cash loan 
• No paperwork 
• Huge amounts of interest 
• Threats if you don’t repay 
• They’ve kept your personal ID or bank cards/possessions  

Research conducted by the Centre for Social Justice estimates that just over a million people may be borrowing from a loan shark; a figure that has more than trebled since 2010. 

WHAT IS A LOAN SHARK? 

Loan sharks are criminals who lend money at huge rates of interest, threatening borrowers if they do not pay, but also controlling them so that they owe money for as long as possible by adding unreasonable interest rates that are virtually impossible to break out of. 

The England Illegal Money Lending Team (IMLT) is running its national Stop Loan Sharks Week campaign from the 26th September to 2nd October 2022 to detail what help is available to people targeted by loan sharks, and encourage conversation about these dangerous criminals among families, friends, neighbours, customers, colleagues and communities through the #LetsTalkLoanSharks campaign. 

The campaign also encourages professionals to discuss loan shark techniques with their clients, to make sure they are aware of the dangers, whether they seem vulnerable to them or not. 

A third of people who have borrowed from loan sharks are reportedly reluctant to report their situation due to their own personal sense of shame and/or threats from the loan shark to keep the deal secret. 

 MoneyMagpie’s Jasmine Birtles says, “Loan sharks are having a field day as the Cost of Living bites and many vulnerable families feel they have nowhere to turn. However, there are charities and organisations around now that can help. Of course, the debt advice charities such as StepChange, Citizen’s Advice, DMA and Christians Against Poverty can help and are able to put people in touch with fair, often charity-backed lenders.  

Also, if the need is not desperate, it’s a good idea to join your local credit union as they are able to lend small amounts to members once they have been on the books for a few months at least. As an ambassador for Fairer Finance https://www.fairerfinance.com/ I know that efforts are being made to make fair loans accessible to all but it is a slow process and we need more government-backed help for those most in need.” 

HOW TO HELP AND GET HELP 

As we bulleted at the top of this story, there are loan shark warning signs such as loans without paperwork, impossibly large rates of interest, as well as detectable changes in behaviour from the person you know, or signs that they are giving personal or valuable items away. 

Debt is a very difficult thing to manage, let alone, discuss, so the person in debt may feel shameful and isolated, as well as anxious to even discuss their problem. As we often say at MoneyMagpie, the first and best step in such matters is to find a sympathetic ear before rushing to any rash actions. 

If you’re worried about confronting someone you wish to help, there are subtle ways of asking the question of loan sharks. Try asking if they need any help with anything, that you’re available to talk and that if they’re struggling financially, you would understand if they had been forced to make unusual efforts to find money. Offer them a friendly ear to open up the conversation. 

Finally, if you or someone you know has been affected by loan sharks, confidential advice and support is available from the Illegal Money Lending Team. Call the Stop Loan Sharks 24 Hour Helpline on 0300 555 2222. The #LetsTalkLoanSharks campaign will run across the Stop Loan Sharks England social media accounts and aims to raise awareness of loan sharks, the dangers they pose and share practical tips on how people can protect themselves. 

MoneyMagpie: Secure Vs Unsecure Loans explained here.  

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