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Will Having Credit Cards Lead to Other Debt?

There are many people that will worry that if you start to take on debt that it will lead to you taking out other loans as well. It is something that is worth contemplating.

Is Debt Bad?

The first thing to consider is whether debt is actually bad. Some people may think that this is a ridiculous thing and that debt is always bad, but actually it can be used as a very useful tool. Many people would not have been able to buy their homes without borrowing the money to do so, but once they have paid their mortgage can leave rent free for years in a property that is theirs. However, uncontrollable debt is bad and borrowing too much money so that you are unable to make the repayments and feel overwhelmed because you owe too much is not a good experience for anyone.

Does Debt Lead to More Debt?

It is difficult to know whether debt will lead to more debt. Some people will borrow money and find that it will be difficult to repay what they have borrowed and so they will borrow more money to help out and get into a difficult cycle of debt. However, there are others that will borrow some money and then repay what they owe and not get into this sort of cycle of borrowing. If debt does lead to other debt, it may not be a bad thing either. For example, if having a student loan leads to a mortgage then this will be okay as long as repayments can be managed. However, if having a credit card leads to getting an overdraft and then payday loans this will not be so good. It will also depend on what the money is being used for. If it is treats and luxuries then it is difficult to justify the borrowing, but if it is to buy a home, pay for an education or to expand a business, then it would seem more sensible. Obviously, there is a risk with all borrowing and so you will need to consider this. You do need to be confident that you will be able to repay the loan and that you have taken out the best loan for you. It is wise to compare different loans and lenders to make sure that you will be getting the best value for money form the loan that you have taken out.

Does This Matter?

So, even if debt does lead to more debt it may not matter. It will very much depend on the type of debt and what the person is borrowing for. It is also to do with staying in control. If you know that you can make the repayments, that you will be able to afford to keep repaying and that you know you will be able to afford all of the other things that you need to buy as well. It is also good to think about the cost of loan and make sure that you are happy with paying that as well. There are lots of things to think about before taking out loans, but if you have thought it through and considered the advantages and the disadvantaged then it is likely that the debt will be okay.

The key thing when taking out a loan is to make sure that you give it a lot of thought. Make sure that you are able to repay it and that you know you will also be able to pay for everything else that you need. Also make sure that you are sure that you are getting the best value for money for the loan and that the items that you are buy are worth paying that extra money for.

What Method of Budgeting Will Suit me the Best?

It is important to realise that there are different methods that you can use for budgeting. This means that you will be well advised to find out about the different methods and then you will be able to pick one that you think will work well for you. It is something which should then help you to be able to more easily stick to your budgeting plan.

Spending First

Some people choose to buy all of their essentials first and then they can allocate a budget to what is left. This means that they will set up direct debits to pay everything they need and perhaps pay off their credit card in full as well and then whatever is left they can allocate, perhaps some to saving, some to repaying loans and some to spending. This works if you know that you will always be able to pay all of your essentials each month and definitely have something left over. IT is really for those people that tend to be pretty frugal and are high earners and low spenders.

Pay Yourself First

A method if you want to increase the amount of money that you have saved up is to pay yourself first. This involves making sure that you put some money into your savings account as soon as you get paid and then making sure that you spend carefully so that you can manage everything else. This ensures that you will not spend the money that you are intending to save. Some people will wait until the end of the month and see what money is left to decide how much they will save and there is always a risk that there will not be anything left and therefore they will not save anything that month. It could also be that you will end up only saving small amounts and that means that you may not build up your savings very quickly.


The idea of this type of thing although you can change the ratios is to spend 505 of your income on necessities, 30% on wants and then save 20%. It is an interesting concept but it will very much depending on your income as some people will find their income barely covers their needs and others will find it very easily covers them. Therefore, you may need to tweak the figures so that they fit in with your specific situation.

Allocate Money to Categories

Some people will split everything that they buy into categories and then allocate money to each of these so that they can then spend that money. This means that they will always know that they will have enough for each item, although there are some prices that might fluctuate, such as utility bills and so there will need to be some flexibility in the system.

It is a good idea to think about what sort of system you think will suit you. You might some flexibility or you may feel that something very specific will work better for you. It could also depend on your goal and why you are looking to budget as to which of the methods will be best for you. It is worth thinking about these and possibly about other ideas that you can think of which might help you to come up with something that will specifically suit you. You may even want to combine a few methods or change one a little bit so that it works for you and it is well worth having a good think about this. Also be open minded and check every so often to see whether you think that this idea is working or whether you think that you will need to make some changes. It might just be a few tweaks here and there or a major change – just keep experimenting until you feel you have something that works.

Should I Have More Than One Overdraft?

There are some people that have more than one overdraft and so it might be something that you could be considering. It is worth taking care to consider this sort of thing carefully as there will be advantages and disadvantages and you need to be sure that it really will be the right thing for you to do.  

Advantages of Multiple Overdrafts

If you have more than one overdraft it means that you will have access to more money. You will be able to borrow more if you need it. It means that if you have an emergency, then you will have access to a lot of money that you can spend. It also means that you will be able to feel more relaxed knowing that there is this money available for you. It could mean that if you do spend a bit of it, there will still some left over and so if you have a series of occasions when you need money, it means that you will have what you need available for you. You may also find that the rates of interest are different and so you could potentially use the cheaper one and then if you use that one up, then you can switch to using the more expensive one and then you will be able to borrow at a cheaper rate and therefore save some money that you would otherwise be paying out in interest.

Disadvantages of Multiple Overdrafts

Having access to more money can sound like a good thing because it means that you will be able to spend more and you will more available if there is an emergency. However, there is also more potential to pay out a lot more money in interest. An overdraft can be an expensive way to borrow money and this means that you will be paying out between about 35% and 40% interest when you use an overdraft. There are other loans that are cheaper than this. However, as you already have the overdraft arranged and it is so convenient and quick to use the money, you may just use it without bothering to think about the fact that you could get a better deal elsewhere. Also, the convenience also means that you are likely to just quickly dip into the money without taking the time to think about the consequences and costs of doing so.

When you have two overdrafts it will mean that you will need two current accounts. Normally with an overdraft, you will repay it when money comes into the account. So, when you get paid or your pension or benefits go into the account, they will repay the overdraft. If you have two overdrafts then this money will only go into one account. This means that the other one will not be repaid and therefore it could last for a long time. All the time that you have the overdraft, you will be having to pay interest on it and this means that you will have expenses. These would not exist if you did not have that second overdraft. Therefore, it is well worth thinking about whether having two is a good idea. It could be better to see whether you could extend the one that you have. If the reason for getting a second was because it was cheaper than your current one, then it could be a better idea to move it all over to the cheaper one and run your current account completely from there and then you will know that the overdraft will get paid off when you get money coming in to the account.

Will Getting a Loan Improve my Credit Score?

There are lots of people that would like to improve their credit score and may wonder what the best method will be for them to be able to do this. There are lots of options and getting a loan is something that some people think will help to improve their credit score. This is something which is worth thinking hard about though because it has advantages and disadvantages.

Advantages of Using a Loan to Improve Credit Score

Many people want to show that they are capable of making loan repayments. They feel that this will prove to others that they are capable of doing this and therefore they will be able to secure more loans in the future. So, they may decide to take out a small loan, in the hope that once it is repaid, it will allow them to more easily take out a larger loan. There is evidence as well, that prospective lenders will be looking to see whether they feel that prospective borrowers will be capable of making their repayments. Therefore, this could potentially be a useful thing to do.

Disadvantages of Using a Loan to Improve Credit Score

Unfortunately, there are a lot of risks of using a loan to try to improve your credit score. The first main risk is that we do not know what each person, who is using your credit score to judge you, is actually looking for. Therefore, if you try to do something to improve it, you never know whether it is something that will be successful or not. So, you are taking a risk if you take out a loan as it could be the case that they actually hold it against you, thinking it is a sign that you are not managing your money well, compared with if you do not borrow and it may even back fire on you.

If you miss a loan repayment, then this will look bad on your credit report and so if there is any risk that this might happen then it is best to not get the loan in the first place. It will provide evidence that you may not be bale to be trusted to repay the loan and therefore could mean that you will be turned down. You will also have to pay more money as there will always be charges for late repayments. Of course, a loan will cost you money anyway so you will need to pay that as well. You may even find that certain types of borrowing will be a turn off to lenders anyway. Some people reckon that if you have had a payday loan then mortgage providers will always turn you down, even if you pay it off on time. So, you need to be so careful about using a loan for this purpose.

Although you may here that there is a difficulty because you need to have had a loan and repaid it, in order to secure a loan, you may actually be able to do other things, rather than borrowing to impress lenders. If you can show that you are capable of making other regular payments, then they may feel that tis will also translate to loan repayments. So, if you name is on a utility bill, insurance policy or something like that and it gets paid on time, every time, then this will show that you are capable of managing your money well and this might be good enough for a lender to take you on. So, think twice before opting to get a loan and think about whether there are other ways that you can improve your credit score without having to take on the high risks of borrowing.

Can Anyone Use Payday Loans?

With some sorts of loans, there are only certain types of people that can use them. This is because you will find that they are aimed at certain purposes, so you will only be able to have a mortgage if you are buying a home. However, there are also other feelings about certain loans and people believe that they are just aimed at certain people. With payday loans, for example, there are people that feel that they are not the sort of loan that they should consider because they are not aimed at them. However, it is good to be aware that payday loans are available to everyone and there are features of the loan which could make them more suitable than other loans too.

Credit Record is Not Important

If you have a poor credit record, then it is likely that you will be turned down for a lot of loans. Lenders like to see that they can trust you and that you have a good background in making payments on time. If you do not have a good credit record, it is likely that you will struggle to get a loan but with loans for the short term, the lenders will not use your credit record to judge you. This means that even if you fear that you will get turned down for loans elsewhere, you will be able to use a payday loan. However, the loans are not exclusively for those with a poor credit report. You could find that you will find that there are other useful features that will make the loans worth considering.

They Can be Arranged Quickly

The loans can be arranged very quickly. Some lenders will be able to provide the borrower with the money that they need within a few hours of them applying. This means that they will be able to get the money extremely quickly, which can be great for an emergency. Many loans will take a lot longer than this and so this can be extremely useful. Lenders will vary though, in how long it takes and so you will need to check with the lender that you have in mind, to see whether they will be able to provide you with the money that quickly.

They are Repaid Quickly

Payday loans are repaid very quickly. Everything you borrow, plus the fees, will normally have to be repaid on the next day that you are paid. This means that you will repay the whole loan within a few weeks at the most. It can feel really great to know that the loan will not be hanging around for too long and that you will be able to repay it really quickly and it will be done with.

You Can Borrow Small Amounts

With a payday loan you will normally only be able to borrow between £100 and £1000. This means that it can be much easier to manage the loan because you are not borrowing large amounts. It can feel less daunting knowing that you will be repaying a manageable amount of money and that you will not be forced into borrowing more than you need, which can often be the case when you take out more traditional loans.

So, you can see that there are quite a few features of payday loans which make then different to other types of loans. It means that the loans could be useful to all sorts of people and it is good to familiarize yourself with them so that you can consider them when you are looking to borrow money. It is always wise to consider all of your options so that you pick the best one for you.