Friday the thirteenth is considered the unluckiest of days by millions of us, and you may well be wondering whether you’re in line for a financial disaster this Friday as the big day comes round again.
If you’ve got that Friday 13th feeling you’re not on your own. In fact there is even a name for it. Apparently you’re suffering from paraskavedekatriaphobia which is the official name for fear of Friday the 13th.
It sounds scary enough on its own. And there are always good reasons to worry when it comes to finance. Financial products are full of pitfalls and traps in the small print just waiting to trip you up.
Fortunately MoneyExpert.com is here to guide you through the potential disaster areas and ensure your Friday 13th is as disaster-free as possible, at least when it comes to your finances. However if you start walking under ladders, stepping on cracks in the road or smashing mirrors, you’re on your own.
Credit cards – watch your SVRs
We’re often told that credit cards are only good for one thing – zero per cent deals and cheap borrowing. Many people think that the only thing that matters in a credit card is the headline rate and the cheap deal. They’ll get the card, enjoy the rate and forget all about it.
But there’s more to credit cards than meets the eye. Once your deal expires, whether it’s 0% on purchases or balance transfers, you’ll incur interest of on average 16% – that’s one of the most expensive forms of borrowing on the market. Card providers call this their Standard Variable Rate – and they won’t be shouting about it from the rooftops, either. So check now whether you are still getting that great deal you signed up for all those months ago – if you’re not, you could be paying anything up to 39.9% on your balance. A frightening thought.
Paying the price for paying up
You’d think that banks would be pleased for you to pay off your loan ahead of schedule. Not so. One of the most important hidden charges to consider is the early redemption penalty. It sounds scary but in plain English it means you’ll get hit with a fee if you decide to pay off a loan or mortgage early, or to move your borrowing to a different product or provider.
What will you pay? Well, it varies. But for mortgages as a standard rule the charge will be on a sliding scale, depending on how long into your fixed deal you are. So, if you’re on a five year fixed rate and you leave in year one, you’ll often pay 5%, in year two 4%, year three 3%, and so on. This may not sound like much but 3% of £150,000 is a hefty £4,500.
Most loan firms charge around one month’s interest to customers who clear their balances ahead of the term agreed at the start of the loan. Research the market thoroughly before taking out a personal loan as proportionately the cost of paying your loan off early can be quite high – as much as £250 if you’ve borrowed around £5,000 at a high rate of 10.9%.
Credit rating trap
Those headline rates sound great on the TV, don’t they? What they don’t tell you is that they’re not available to everyone who applies. Every financial application you make is subject to the same set of checks, and if you fall foul of these you won’t be offered the top rate you’ve seen on the telly.
Credit checks are based on factors such as your employment, income and current debts. The provider will score you on these factors and if you meet their magic number they will give you the money. Much of this will be based on a historical record of your financial commitments and repayments as lenders will be looking to see whether or not you’ve paid loans and bills off on time in the past.
The best way to avoid those Friday 13th blues is to check your credit profile before you apply – that way you won’t be disappointed if you’re rejected and you will have a clearer idea of what sort of rate to expect. Click here to try MoneyExpert.com’s credit profile tool.
Watch the small print
Every financial company has to tell you about the pitfalls of signing up to one of its products. The problem is more often than not these are well hidden in tiny small print. Don’t get lazy and ignore the words, however, as although they look small, they can punch well above their weight and it’ll be your pockets that pay the price!
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