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How to keep your financial health in check during 2023
Vicky Parry
31st Jan 2023
By Neil Kadagathur, CEO and Co-Founder, Creditspring
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.
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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.
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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.
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.
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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.
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.
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KIND REGARDS,
TEODORA
21.4.2023
SOFIA