What Is a Savings Account and How It Can Secure Your Future?

Most individuals look at the products and services offered by banks and only see them as solutions to momentary issues. This is true when it comes to personal loans, mortgages, payday advances, and credit cards; however, these are not the only things that banks have to offer. Savings accounts are often neglected by people because they need to be constantly fed money. For many, this is the opposite of what they need from a bank; however, these accounts are some of the best tools for securing an individual’s future. Almost every lender offers savings accounts as part of their products portfolios, which means that it is easy to shop around until you find one that has terms and conditions that suit your needs.

What to Keep in Mind When Opening a Savings Account?

Generally speaking, a savings account is only as useful as its terms and conditions. If you intend to open one, make sure that it has a high interest rate and that it does not have a mandatory monthly contribution. Furthermore, read the agreement thoroughly and ensure that you can withdraw money from it without any penalties or additional charges. This having been said, savings accounts work like piggybanks. Once you deposit the money in the account, you should not withdraw it unless you absolutely need the funds.

A Bit of Discipline Will Go a Long Way

The main advantage of a savings account is the fact that you can use compound interest to make your money work for you. In the long run, it is possible to increase the amount of money in the account to the point where an individual can live off of the interest rate alone. However, this requires a bit of discipline.

It is not enough to make an initial deposit and then wait to receive interest every year. While this will increase the amount of money in the account it will only do so by a small percentage. On the other hand, if you make regular deposits, preferably every month, the funds stored in the account will grow faster and so will the compound interest rate. It is a common practice for many individuals to add money to their savings accounts regularly and to only withdraw the interest, once per year.

Financial advisors have estimated that if an individual opens a savings account and deposits £100 each month, it would be possible to live off of the interest rate after 20 years.

Savings Account Raise Credit Ratings

Most individuals are not aware of the fact that having an active savings account can also increase their credit rating. Lenders will not only establish that you can efficiently manage your finances but also agree to give you larger loans. In some cases, it may even be possible to use the savings account as collateral for a secured personal loan.

Savings Accounts Can be Better than a Retirement Pension

As the global economy becomes less stable with each passing month, more and more individuals have started looking for alternatives to the regular retirement pension. The banks that offer retirement funds are multinational private companies and, by definition, tend to be much more stable than most local economies. Opening a savings account and contributing to it regularly can increase its interest rate over the current basic state pension of £134.25 per week.

Savings accounts are some of the most useful financial tools that banks have to offer, but using them effectively requires careful planning and discipline. Furthermore, they are not useful in the short term. Once you open an account, you should contribute to it at least 3-4 years before withdrawing money from it.

Financial Mistakes

The Most Damaging Financial Mistakes and How to Avoid Them


An individual’s credit file contains all his financial history. It includes everything from loans that he has applied for and credit card usage information, to details regarding how he has repaid the money. However, the most important aspect of this file is that it is used by lenders to establish who is eligible for their products and services. Banks, among others, use information from the credit file to calculate a rating on which they base their loan eligibility decisions as well as the value of the interest rate. Generally speaking, individuals must build up their credit ratings over time. This is done by getting loans, using credit cards, and repaying the money on time.

What most people do not realise is the fact that some financial decisions that may seem great for building up one’s credit score can be, in fact, very damaging. Today we will look at these and determine how they can be avoided.

  1. Using Your Credit Card too Often or Spending too Much at Any Given Time

Credit cards are financial products designed to be used for any type of expense, from groceries to paying for medical services or electronic devices. Most individuals’ use them believing that this will help them increase their credit rating, however, this is not always the case. Lenders look at how often a credit card is used and when an individual uses this form of financing too often, they conclude that he may not be able to get through the month without the extra credit. This may, in fact, lower his credit rating.

It is also important to keep in mind that the credit utilisation ratio is important in calculating an individual’s credit rating. This means that using too much of the credit that is available to you through a credit card will also lower your score. Ideally, the credit utilisation ratio should always be kept under 30%.

  • Submitting a Large Number of Applications in a Short Time

When they need a loan, potential borrowers tend to submit applications to multiple lenders to find out what interest rates they would get from each of them. Unfortunately, these applications are all recorded and they can hurt one’s credit rating. If you need to take out a loan and are interested in what terms and conditions you would be offered, it is recommended to issue an informal request to the lender. Furthermore, most banks offer interest rate calculators on their websites, as well as simulation engines that enable potential borrowers to determine how much a loan would cost them and what their monthly payments would be.

  • Repaying a Loan with Money Borrowed from Another Lender

While there is always the option of refinancing a loan or consolidating one’s debt, some individuals try to repay their older loans with new ones taken out from different lenders. Please keep in mind that this is not illegal, however, it will have a serious impact on your credit score. An individual’s credit file contains all the loans that he gets as well as how he repays them. This means that the lenders will understand what is happening and may not be inclined to give you another loan in the future. If you have difficulties repaying a loan and cannot consolidate your debt or refinance it, we recommend using online lending services to borrow money. These loans are usually not reported to credit reference agencies, which mean that they will not show up on your financial file as a standard loan. In most cases, it will be recorded as a regular transaction.


Is It Better to Borrow Money from Banks or Other Types of Private Lenders?


The development of online lending platforms has given individuals considerably more options when it comes to borrowing money. These, along with various other types of private lenders such as credit unions, credit card companies, and private creditors, are often a viable alternative to banks. However, getting loans from private lenders is not always better than borrowing money from banks. In most cases, it all boils down to 3 important details:

  • Whether or not the borrower has a high credit rating;
  • How fast the borrower needs access to the money;
  • How often an individual intends to borrow money;

This having been said, there is no easy way to establish if it is always better to borrow money from banks or other types of private lenders. Here is what you need to consider:

Take Your Credit Rating into Consideration

All banks will perform credit score checks to decide if an individual should get a loan or not. Depending on the borrower’s financial history, the lender may refuse the loan application or take precautions to ensure that all the money will be repaid.

Generally speaking, credit score checks are performed whenever an individual applies for a personal loan, line of credit, mortgage, and even business loan. This can cause borrowers who are going through financial difficulties to be unable to get any sort of loan. On the other hand, there are several types of private lenders that either do not perform credit score checks or simply have lower requirements when it comes to its value. This means that private lenders may be better for individuals who have low credit scores, or for young adults who do not yet have a financial history that is large enough to allow them to borrow a considerable amount of money.

Speed May Sometimes Be Important

All banks have a similar operating structure. They allow potential borrowers to submit their application, as well as all the papers that are required for the loan. While the application submission can only take a couple of minutes, gathering all the documents that are requested by the lender can take up to a week. Once the borrower has submitted the application and the documents, the lender will analyse them. This step can take an additional week, however, in some cases; it can last for an entire month. The point is that banks tend to work slowly, which may not be suitable for the needs of some individuals.

However, private lenders (especially online ones), skip this verification and only require documents that are easy to get and submit, such as proof of address, proof of income, and proof of identity. This enables individuals to get loans in less than 48 hours and there are even private lenders that offer same-day deals.

Borrowing Money too Often May Damage Your Credit Rating

All banks report loans to various credit agencies, which mean that every time an individual borrows money; his credit rating will be affected. While this is not a problem for people who only take out one loan every couple of years, whose who need to borrow money regularly will see their credit scores drop. However, most private lenders do not report the loans, which mean that they will not be recorded in an individual’s credit file. This is ideal for those who are having a difficult time managing their monthly expenses without financial help.

Overall, traditional lenders such as banks are stable and are useful for those who do not depend on their services to get by. Taking out a loan from a bank can take up to a month, there are a lot of documents involved in the process and borrowing money too often can reduce an individual’s credit rating. On the other hand, private lenders have higher interest rates but go through loan applications much quicker and require less information to evaluate potential borrowers.

Online Lending

A Simple Guide to Online Lending


The recent advancements in terms of fintech have led to the development of a large number of online lending platforms. These have had a slow start; however, they are currently the main competitors of banks and other private lenders such as credit unions. An increasing number of individuals have even given up on the services of banks altogether and are currently only borrowing money through these services.

This shift in behaviour has several reasons, the most important of which is the fact that most online lending platforms do not perform credit rating checks when deciding if an individual is eligible or not for a loan. In addition to this, these online services are often easier to use than the ones offered by banks because the borrower is not required to physically submit any documents and everything is done solely over the internet. Generally speaking, online lending platforms are safe to use, however, some websites use somewhat shady methods to convince individuals to borrow more money than then need or to agree to dangerous terms and conditions.

Choosing a Safe Online Lender

There are hundreds of online lenders to choose from and each is free to design his offers however he sees fit. This means that not lenders have the borrower’s best interests in mind. This having been said, look for platforms that are as popular as possible. These have thousands of active users which mean that if anything goes wrong, there will be someone to signal it to the others. Another useful practice is to go to a third-party review website, such as TrustPilot and to see if other users have found the platform safe. Lastly, only use platform whose addresses begin with “HTTPS”. This will ensure that your connection to the website is safe and that nobody else has access to the data that you send.

How to Analyse the Deals That They Offer

The trick you making sure that online lenders do not try to hide various fees, make sure to read all the documentation offered by the platform. This includes the terms of service, privacy policy, and anything else that may have an impact on the services that are offered by the platform and on how you will have to repay the money. If you have any questions or if anything seems unclear, do not hesitate to contact the customer support teams of the website and ask for a detailed explanation.

As a safety measure, never use your main bank account when borrowing money from an online platform. Instead, consider opening a new one and using it as a buffer between the lending platforms and your main account. This will ensure that if the lending platforms ever want to charge you without your knowledge, they will not have access to the entirety of your funds.

What Dangers to Take Into Consideration?

There are two important elements that borrowers should always keep in mind when using online lending services:

  • The Platform May Withdraw Repayment Money Automatically –Most platforms will automatically start withdrawing repayments from the borrower’s account. This form of automation is useful in most cases, however, it may cause issues if the account is empty or if you need all the money that it contains;
  • Some Platforms May Sell Personal Data –Certain platforms tailor their agreements so that they gain the right to sell the user’s personal information if he does not repay the money on time;

These details will always be contained within the terms and conditions of the platform. Make sure to read them thoroughly and to only use lending platforms that you trust.


How to Find the Right Lender for You?


The appearance of online lending services has given individuals a lot more choice when it comes to deciding how to borrow money. However, even these online-based loans have disadvantages that borrowers must take into account, such as higher interest rates. Generally speaking, there is no perfect lender and each individual will have to know how to determine which is the best one for him. This having been said, there are hundreds of online lenders to choose from, multiple banks, as well as various other types of private lenders that operate throughout the country. Having too many choices can create confusion, especially for individuals who are not used to taking out loans.

Luckily, most lenders can be placed into one of several categories, based on how they operate and how their services can affect the borrower’s credit rating. Here is what you need to know:

Online vs. Offline Financial Services

There are two main choices when it comes to choosing a lender: internet lenders (or online lending platforms) and traditional, physical lenders (banks, for example).Each of operates differently and decided to borrow money from one or another will have a considerable impact on your credit file.

Traditional lenders are banks, private lenders and credit unions, among others. Borrowing money from these will be marked on your credit file and missing repayments will directly affect your credit rating. Physical lenders tend to offer a larger number of types of credit than online ones; however, borrowing money from them can take considerably more. This is usually because borrowers need to submit several documents that must then be analysed by the lenders. The latter also performs credit rating checks to decide whether or not the borrower should receive a certain type of credit.

On the other hand, online lending services are less restrictive than physical ones. They usually do not perform credit rating checks and do not report the loans that they give out to any of the main national credit rating agencies. This means that borrowing money from them will not affect an individual’s credit score or be marked on his permanent financial records. It is also worth mentioning that most of these companies take less than 24 hours to go through an individual’s application and transfer the loan money. All of this, however, comes at a cost. Online lending services have higher interest rates than physical ones.

Banks vs. Other Private Lenders

As far as choosing between banks and other private physical lenders is concerned, it is more a matter of preference than anything else. All banks operate more or less in the same way, which means that borrowers know what to expect when getting a loan. However, private lenders such as credit unions, private lending companies, pawnshops, and credit card companies have much more freedom in terms of how they develop their offers and what types of charges they attach to them. There is often more risk involved in borrowing from private lenders because they tend to introduce hidden charges or clauses that increase the interest rates in certain scenarios.

Security Concerns

All banks are safe, for the most part, however, when it comes to online lending services and private lenders, all security concerns are related to whether or not the lenders are authorised (this can be established through a simple web search), and if the connection is secure. The security of the website’s connection can be seen by looking at its address. If it starts with “HTTPS”, then it is safe to use. As for other private lenders such as pawnshops and credit unions, borrowers must pay special attention to the terms that they agree to.