Savings and Loans

Savings

Savings help you plan for the future and cope with bills and expenses. Without savings, these bills may become unpaid debts or they may have to be paid by loans or other forms of borrowing.

Sometimes it may seem that all your money is paid out as fast as it comes in, and there is no chance of saving anything. Some people find that making just a few small changes can make a big difference. Using a budget planner can help you organise your spending. Tandem advisers can check that you are receiving all the money you are entitled to, even if you are working.

Once you have put some money aside, even 50p per week, you need to make this money work for you.

Here are some things to think about:

• Many people prefer to keep their money at home or in their wallet or purse. This means that you don’t get any interest on the amount and you are at risk of getting all your money stolen, with no way of getting it back.
• Banks and building societies now offer a wide range of bank accounts - including Islamic accounts which comply with Shariah Law – so there is likely to be one that is right for you. There are a few things to consider when choosing a bank account and The Financial Services Authority (FSA) produces a helpful guide to basic bank accounts to help you decide.
• Credit Unions are a sort of community bank, run by and for members of your community. There are friendly, local collection points, your money is very secure and credit unions give you the option to save and also borrow at a low rate of interest. View contact details and collection times relating to credit unions in Middlesbrough and Stockton, or talk to your Tandem adviser to find out more.
• Remember, you are paid to save, but it costs to borrow.

Borrowing money

• There are a number of different ways to borrow money, some more expensive than others. You need to know your rights and to understand and agree with the terms of the loans before you sign up. Check the small print and make sure you can afford the repayments in the future, even if your circumstances change.
• Ask yourself – Can I get what I need without getting a loan? What is the cheapest loan I could get? Can I afford the payments?
• Ask the loan company – What is the APR? How much am I paying back in total? What happens if I miss payments? When will my last repayment be?

Interest free loans from the Social Fund

• Community care grants, interest-free crisis loans or interest-free budgeting loans may be available from your local jobcentre for certain items, if you are eligible to apply.
• You will not have to pay back a grant and interest-free loans are usually repaid straight from your benefits, or from your earnings if you get a job. The Directgov website has more information:
  
  

Loans from banks and building societies

• Banks and building societies usually charge competitive rates of interest to encourage you to borrow money. You need to have a bank account and to be able to show you can afford the repayments. The interest rate you are charged changes from person to person, bank to bank. Usually, loans are only available for £1000 and over.

Loans from your local Credit Union

• Credit unions offer low cost loans to members. To become a member of a Middlesbrough credit union, you need to live or work in Middlesbrough and join your nearest credit union. To become a member of the Stockton credit union, you need to live or work in Stockton.
• In Middlesbrough, the amount you can borrow depends on how much you have saved with the credit union and how long you have been a member.
• For example, if you have been a member of a Middlesbrough credit union for 13 weeks and have saved £100 in this time, you can apply to borrow one-and-a-half times your savings. The APR is just under 13%. This means you can borrow up to £150, make regular repayments and still have money in your savings account.
• Stockton credit unions can even lend money to new members who haven’t yet built up savings. This is because they have access to the ‘Growth Fund’. Please contact your local credit union or Tandem for more information about credit union savings and loans.

Loans from the Five Lamps, a Community Development Finance Institution (CDFI)

A loan from the Five Lamps is usually more expensive than borrowing from a bank, building society or credit union, but is cheaper than borrowing from a doorstep lender. The APR is just under 30% but all the interest is added on at the start of the loan, so there are no hidden charges. The Five Lamps is a charitable organisation, set up for the benefit of the community.

Tandem was set up as a partnership between Erimus and the Five Lamps, to increase the choice of loans available to Erimus tenants and leaseholders and to provide specialist financial advice. Tandem advisers work closely with the loans officer from the Five Lamps. A Five lamps loan is only given if a person needs a loan and can afford the repayments, and if all the cheaper loan options have been considered first. Five Lamps loans are given as an alternative to a doorstep lender loan, which has a much higher rate of interest.

Five Lamps loans and details on how to apply

Loans from doorstep lenders and other licenced companies

Borrowing from doorstep lenders is usually much more expensive than the options listed above. Some people like the ease and convenience of borrowing from a doorstep lender.

Some people like the service of an agent who collects the repayments at your home. Some people think they have no other option as their credit rating is poor.

Tandem can help you look for cheaper loan options.

The APR starts at 183%. You can use the table below to compare typical loan costs between different loan providers.

Loan Provider	Amount Borrowed	APR	Number of weeks	Weekly payments	Cost of Loan	Total Repayable
Doorstep lender	£300	183.2%	52	£9.69	£204	£503.88
The Five Lamps	£300	29.9%	52	£6.57	£41.64	£341.64
Credit Union	£300	12.68	50	£6.35	£17.59	£317.59

Other legal ways of borrowing money to get goods and services

• Buying things from a catalogue and making weekly payments
• Buying furniture or other items from a high street store and making weekly payments
• Using cheque-cashing shops or pawnbrokers

This can be a very expensive way of borrowing money. Before you sign up, read and make sure you understand and agree with the terms and conditions. Spend time finding out if you can get a cheaper deal elsewhere. Check the small print carefully and make sure you can afford the repayments, even if your circumstances change.

Unlicenced loan companies

These are sometimes called loan sharks and the service they provide is illegal. Tandem advises you not to borrow money this way, even for a short time, there is always a legal alternative. Loan sharks may live or work locally and will often be known on the estates. A loan shark will offer to lend you money without giving you a legal contract and problems will certainly arise if you miss payments. Unlicenced loan companies choose their own rate of interest and their own terms and conditions and some loan sharks threaten violence or worse, if payments are not made.

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