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Get on top of your finances in 2021

Take control of your money and find ways to save better

As we enter the New Year, many of us are thinking about money and finding ways to save after the cost of Christmas. Getting on top of your household finances with a few smart decisions can make a huge difference to your monthly outgoings, leaving you with extra money for when you need it.

Let’s start with potentially the biggest saving you can make. If you’re a homeowner with a mortgage, you should pay close attention to the deal you’re on right now. If you’re not tied to a fixed-deal, you’re probably on the ‘standard variable rate’ which roughly translates to a rubbish deal… So, you should look to remortgage your home ASAP.

Remortgaging is when you switch your current mortgage to a new deal. You don’t need to be moving home to remortgage and you can even stay with the same lender.

Why should you remortgage then? One of the biggest and best reasons is that you could save hundreds or thousands every year with a better deal. This is because the standard variable rate that mortgage providers move you to, once your fixed deal ends, can be much higher than their best rate. This means you could be paying far more than you need to for living in the same home.

If your current fixed-term deal is coming to an end, you should make sure you find a new deal to take its place, before you’re moved to your lender’s standard variable rate (SVR).

But it’s not just about the savings, getting yourself on a fixed-rate deal means you can manage your money better, as you’ll know exactly how much you’ll pay each month.

While you might think that remortgaging will be a huge hassle and take forever, it’s normally much faster than when you buy a new home. If you stay with the same lender and don’t borrow more on top of your existing mortgage, it can take as little as a day to switch. If you’re switching to a new lender, you’ll need to go through a longer process, but the savings are more than worth it.

To find out how much you could be saving, use a price comparison website to find deals that are available to you. They’ll order results with the cheapest at the top, so you can quickly see the difference a switch can make.

So, now that you could be saving hundreds, or even thousands a year, what are you going to do with it? Well, a savings account would be a pretty good place to start.

Savings accounts come in quite a few forms, but ones to know about are fixed-rate savings accounts and ISAs. These offer guaranteed interest rates that you can rely on.

When signing up, you’ll be asked to decide on the term. This locks away your money for an agreed period, which means you won’t be able to access it in the meantime. But, for agreeing to do this, you’ll be rewarded with a higher interest rate. The longer you agree to tie your money in, the higher the rates tend to be.

Of course, if you’d rather have the flexibility of accessing your money whenever you need it, instant-access savings accounts are available. You just won’t usually get the better rates.

Just like with mortgages though, these accounts will advertise a great rate to begin with, but you’ll later be moved to a much worse rate. That’s why you should keep an eye on your account and be ready to switch to a better deal.

Switching your savings account or ISA isn’t very difficult at all, just simply fill out a few forms and your account will move over, even if you’re moving to a different bank. You can switch accounts as often as you like, so you can make the most of the best savings accounts and ISAs on the market. To help you find a better deal, comparison websites can help you quickly compare accounts in minutes, saving you the hassle of shopping around.

If 2020 was a rough year for your finances, there’s always something that can be done to help get you back on track. If you’ve had issues with loans and debts, which have seen your credit score suffer, you can help it recover.

A credit building credit card is a great place to start. If you’ve found it hard getting accepted for a standard credit card, or been refused another type of credit, like a loan, these offer a much higher chance of being accepted. They can help you improve your score and be accepted for credit in future.

Credit building credit cards work by placing stricter limits on your spending. So, while they’re easier to get hold of, you’ll be restricted as to how much you can borrow. The spend limits are usually lower than standard credit cards, but these vary between providers. Expect limits of less than £1,500 though.

You should also be aware that the APR (annual percentage rate) will also be higher, meaning that you’ll be charged more in interest if you don’t pay your balance off each month. This means you need to manage your money very carefully when using these cards.

However, if you spend and manage your money right, these credit building credit cards can help prove to your provider that you’re responsible with money, which means your credit score will start to improve. In time, you’ll then be eligible for better credit cards, higher spend limits and lower APRs.

You should be careful when applying for credit products like credit cards, as successive failed applications can cause your credit score to plummet. To avoid this, use one of the online eligibility checkers, which can show you credit cards that you’re likely to be approved for, without needed a credit check. Once you’ve found one you like, you can then apply, confident that you’ll have a great chance of being accepted.

In 2021, find ways to better manage your money, savings that were hiding under your nose and the products that can help you get back on track.

Tom Harrison, content writer in financial services


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