The following article contains financial advice that might not be suitable for US audience. as Saving account rates in US is too low to consider it as an investment option. This article is more suitable to countries where savings bank rate is much higher than in US.
From time to time, most of us will need to take out a home loan. This may be in order to cover an unexpected expense or to finance a more planned project. The overall cost of these products can be high, as they will generally include an arrangement fee and monthly interest charges. However, it is possible for a shrewd borrower to minimize these costs by using a variety of money saving techniques. For example, in order to offset some of their costs, borrowers can invest a proportion of their loan in a high interest savings account.
In order to benefit from this method, select the best savings account with interest offered at preferable rate. Be sure to research financial institutions that focus on internet savings accounts, as well as the more conventional high street banks. Bear in mind that companies which offer these preferential rates of interest will tend to lock money away for a specific period of time, or alternatively they will make your cash harder to reach than it is in a current account.
Interest rates on home loans vary greatly from institution to institution. To benefit from this competition spend time shopping around before you make a final decision. Do not assume that your own bank will offer you the same rate as every other borrower, especially if you have a good credit history. Often banks can offer a better deal to existing customers. Moreover, companies prefer lending to customers who are creditworthy as they pose less risk.
Be proactive when looking for a loan, checking the small print could save you a large amount in the long run. Companies are fond of using the term ‘representative’ when advertising the interest rate of their products. Do not assume that this figure will be applicable to you until it is confirmed in writing. Lenders use a great sounding rate to lure in borrowers, but frequently they only make this offer available to just over half of successful applicants.
Finally, only borrow what you need and repay your loan as quickly as you can. Before approaching a lender, work out how much you can afford to pay back each month, whilst still living comfortably. Over borrowing can leave you with a huge debt, so instead opt for a sensible loan of the bare minimum required. This will ensure you save money on interest and get the loan paid off in a shorter space of time.
About the Author – Cindy Broadhurst is a professor of finance in Melbourne. She stresses the importance of a savings account and conducts seminars on budgeting for newly married couples.