Will Brexit Cause a Rise in Interest Rates?

Brexit has raised many concerns with many people. A lack of household finance is one which many people will resonate with. Concerns over increases in prices, lack of jobs and raising interest rates could be some of the things that people are concerned about. Interest rate rises are a concern to any one that has a loan as if the Bank of England raise the Base Rate then lenders tend to raise their rates too. Anyone in a fixed rate deal will be spared, at least in the short term, but anyone with a variable rate loan or taking out a loan in the future could be impacted. It is wise not to panic though and consider both the chances of the rates rising as well as what to do if they do rise.

Will Interest Rates Rise?

This is the million-dollar question that people ask in many different circumstances and it can be very difficult to predict. Interest rates are controlled by the Bank of England who have set criteria on when they change them. Their main aim is to keep inflation around the 2% mark and if it moves significantly away from that percentage then they will adjust the rates accordingly. If inflation rises then they will raise rates to keep inflation down. Therefore, whether rates rise will depend on whether prices go up. The predictions have been that if we leave with no deal then we will have to pay more import duty on many things particularly those from the EU until we negotiate a trade deal, which implies prices will go up. That is assuming that retailers add on the tax, which is usually the case. However, if we leave with a deal, then there will be a period of time for negotiating where it is likely that imports will not be taxed any differently. After this then imports could become dearer or cheaper depending on what deals we can negotiate. Of course, there are some people also still hanging on to the hope that we will not leave at all.

Uncertainty can also be a big factor in the markets and this has an impact on prices in a less direct way. However, things have been uncertain for a long time now and so this is unlikely to have already had all of the impact that it is going to have. It is therefore likely that this will not impact prices.

Of course, there may also be other world or UK events that happen at the same time as Brexit would could lead to a change in prices, which may have more of an impact, but it is impossible to predict what that might be. Therefore, there can never be any certainty about what might happen.

How to Protect Against Rate Rises

There are a number of things that you can do to protect yourself against rate rises. It is wise to put some into action now, if you can and have some ready in case you need them. For example, make sure that you do not have a loan that is more expensive than necessary. Swap to a cheaper lender if there is one available to swap to without too high an admin charge.  It is also wise to put aside some money as savings so that you have something to fall back on if you are struggling to cope in the future. Also note down some ideas about where you might be able to reduce your spending or how you might be able to make more money. Then, if rates do rise, you can look at the notes and do some of the things you have listed there. It can also be really wise to overpay your loan if you can. This means repaying more than necessary so that you owe less money. This will mean that when you are charged interest, there will be less money to charge the interest on and therefore you will be paying back less. You may even be able to repay the loan in full before any interest rises occur. There are many things that you can do to protect yourself against rate rises. However, whether these happen as a result of Brexit or just happen anyway, it is likely, that if you have a long-term loan that at some point, you will see a raise in rates. It is therefore really important to make sure that you are prepared for this. When you take out the loan, you should ideally be imaging how much you might have to be paying for repayments if the rate is significantly higher and whether you will be able to afford that. If you already have the loan, do that now and think about how you will manage and whether there are any changes that you can make now that will help you to plan for that.

Should I use a Payday Loan or a Credit Card?

If you are in the situation where you are trying to choose between different lending options then it can be quite tricky to make the right decision. It is not easy and it can be down to personal circumstances as to which might be the best for you. For example, both a payday loan and a credit card can offer a relatively small amount of borrowing fairly quickly and you may wonder which could be best. It is good to understand more about them first as they work very differently.

Credit Cards
Credit cards are usually only offered to those people that have a good credit record. They can take a while to organise, but once you have one you will be able to use them to pay for things without having to use cash. You will have up to six weeks before you have to repay them. You will then be sent a statement which will let you know the minimum amount that you will have to pay and how much you be charged in interest if you only repay that amount. You will also have the option of repaying in full with no charges or repaying a proportion of what is owed and not pay such a high charge. Most shops accept credit cards and so they can be handy when shopping but also might be able to be used for paying bills. Sometimes there are charges for using them and if you use them to withdraw cash from an ATM then you will be charged. The cards can be good if you can afford to repay them in full as there are no charges at all then, which is something not offered by any other loan.

Payday Loans
Payday loans will allow you to borrow a few hundred pounds until you next get paid. They can be arranged very quickly and no credit check is done. You usually have to repay in one lump sum when you get paid. The loans therefore do not last very long which means that you can get the stress of being a borrower over a done with very quickly. The can be expensive though, especially if you do not repay on time.

Which is Best?
Choosing which is best will depend on your circumstances. Firstly, if you need the money really quickly and do not have a credit card already, then a payday loan will be much quicker. However, if you already have a credit card, then the credit card will be quicker. If you have a poor credit record and have no credit card then you may find it tricky to get one whereas this will not be the case for a payday loan.

If you still have both as an option then compare the costs. The monthly costs could be very different with a credit card being free if you pay if off immediately but there will always be charges for a payday loan. However, if you do not pay the credit card off right away and only repay the minimum until it is paid off, it might be dearer than a payday loan. It is worth looking at the figures and thinking about how long it might take you to repay a credit card and therefore roughly how much it might cost you.

Repaying the payday loan in a lump sum is an advantage to those borrowers that would like to get rid of their debt really quickly and are confident that they will be able to repay it right away. However, some may prefer the flexibility of a credit card and being able to take longer to repay it which will mean they will not have to find the money all at once, which may be too difficult for them. They may also fear the cost of not repaying a payday loan which could potentially be a lot higher than spreading the cost of a credit card. However, if you leave the credit card debt outstanding for a long time or do not even pay the minimum balance, then it can get really expensive too.

As you can see, it is a really personal decision. It will depend on your credit record, how quickly you need the money and how you want to repay it. It is worth also considering other options such as using any savings you have, going without entirely or using an overdraft or alternative loan as these might be cheaper. It will take time to think about all this, but will be worth it if you find the right loan type for you. It may not take as long as it seems either, it is just a case of deciding which you would like and working out the costs so that you can properly compare your options.