Raising Money in 2010
A new decade has begun, and brings with it optimism that the worst of the recent recession has passed. But for those who remain out of a job, or struggling to make ends meet, what are the options available to ensure your financial circumstances don’t take a turn for the worst.
Where do you start?
A good starting point is to answer the following questions:
o Are you looking to raise money to meet other commitments, take a holiday, buy a new car, pay your children through university or college?
o Will you be able to repay the money in future, and if so, over what time horizon are you looking to repay the money?
o How much money do you want or need to borrow?
Short term borrowings
If you are looking to raise money to meet financial commitments, or take a holiday, then short term finance may be the answer.
Common methods of short term borrowings include:
o Credit cards – many credit cards offer a number of ancillary benefits, such as airmiles, cashback, interest free periods, free travel insurance etc
o Bank account overdrafts – can usually be arranged quickly, and the amount is available immediately
o Payday loans – becoming an increasingly common method of raising short term finance, but only available to those with a steady income, and often involves exceptionally high interest rates
o Borrowing from friends or family – often the cheapest option as they don’t normally charge any interest, but often can be more difficult to ask those that are closest to you, and may put a strain on the relationship if you have difficulty repaying
The forms of finance allow you to get the money you need quickly, to be repaid over a short period of time. But you will be limited in the amount of money you can borrow, since the money is likely to be repaid in a relatively short period of time. Overall, you end up meeting your short term goals, without committing yourself to a long term burden to repay any monies borrowed.
Longer term borrowings
If you are looking to raise a significant amount of money, to be repaid over a longer term, then there are a number of long term finance deals available. Such deals may be more appropriate where you need to raise money to pay your children through university or college.
Common methods of long term borrowings include:
o Personal loans – offered by virtually all high street banks, building societies, as well as a number of online lenders, with a wide range of amounts/repayment periods available
o Remortgages – a relatively cheap method of finance, secured on your home, but may extend the time taken to clear your mortgage
Where you are looking to raise a substantial amount of money, but do not want to have to repay the money, perhaps because you do not have a job, or are close to retirement, then there are still a number of options available to you:
o Equity release – release the equity tied up in your home in a tax free lump sum, with no commitment to repay the money, and without the need to move home
o Selling your home – instead of releasing equity, you may wish to consider selling your home, either in the traditional way through an estate agent, or by making a quick sale to a home buyer association
o Selling off other assets – if you have other assets, e.g. investments, you may wish to consider selling these first
o Releasing your pension – one of the most significant assets held by most people is their pension, however, releasing your pension early could cause hardship in retirement if not dealt with responsibly