Published: 22/08/2022
Save for later or borrow now?
If you don't have the cash available when you need to pay for something, there’s usually two options. You can save up to buy later or borrow the money now and pay more.
The best choice will probably be determined by your circumstances. Both options have their drawbacks and benefits. Here's 1Plus1’s guidance on what's involved in saving or borrowing.
Saving for later
There's usually no charge to open a savings account, and the interest rate provides a little extra money. Saving money is more of a long-term and cheaper option.
Rates are low at the moment and the interest rate is known as the AER (Annual Equivalent rate). This takes into account whether it's a simple or compound rate, as well as how often (monthly, annually or at the end of the plan) the interest payments are made.
Some accounts require regular deposits, or a deposit to open the account, ranging from just £1 to over £1,000.
If you’ve a big goal, a savings account will take time to grow. Some account providers may require a notice period before you access the money or charge for withdrawals.
Saving money is a good idea for:
Borrowing
It's usually at a cost, but taking out a loan is a quicker way to get the money you need.
Lenders typically charge an interest rate for the cash they lend you, known as the APR (Annual percentage Rate). The APR includes compound interest as well as any other fees to give you a clear picture of the total cost of the loan.
Different types of loans will offer various interest rates and term lengths. Typically, the longer the term the more interest you'll pay. A longer term can also give you lower monthly repayments but you will pay more overall.
You can get secured or unsecured loans. A secured loan links to some form of collateral, such as a mortgage secured on your home or car finance (typically HP) secured on a vehicle. Lenders can repossess the property or asset if you don’t make repayments.
Unsecured loans are not protected by either guarantor or security on an asset. These loans usually have higher interest rates because of the higher risk for the lender.
Some loan providers charge a fee for making early repayments, which varies depending on the loan.
You may want to take out a loan for:
Home improvements
And the better option is?
How soon you'll need it and what you need the money for will drive your decision to either borrow or save. If you need the money sooner, then a loan may be the best option. But if you can save, it could be the cheaper option in the long run.
1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.
If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.
Last updated: 23/08/2022
