Personal Finance Options

Mortgages
A popular way to borrow money for purchasing a home is with a mortgage. The money lent to you is secured against the property itself. This means while you are paying your mortgage, the lender has rights to some or all of your property. If you default on your mortgage, the lender can recoup their losses from the sale of the property.

How much you can borrow depends on your credit rating and financial situation. The cost is greater the higher the percentage of the purchase price is given to you by the lender; as the risk to the lender is greater.

Most mortgage terms are set for 25 years, but shorter terms are also available if you are willing to make larger payments in order to clear your mortgage more quickly. The actual cost of your mortgage, including interest charges, is always less the quicker you pay it off.

Personal Loans
These types of loans are usually a more expensive way of borrowing money but they also offer the most flexibility since they can be allocated for any purpose. Since the person taking out this loan is not required to answer for how he or she will be using the money, the risk to the lender is higher, hence the greater cost.

The lender will consider several factors before charging you for a loan, based primarily on your personal circumstances. The period of the loan is also taken into account and the longer terms usually carry a lower interest rate. However, since you are paying over a longer period of time, the cost of the loan is higher in the long run.

Pensions
Providers that started final-salary pensions (generally dependant upon investment) have found it more and more difficult to meet their commitments in a slow market.

However, the basic state pension does not provide a good standard of living on its own, so you will probably need to buy an additional pension.

Your choices may affect you for the rest of your life, so choosing your pension arrangements may be the most important financial decision you’ll ever make.

Insurance
Most people get insurance because:

• The law requires it (i.e. vehicle insurance)
• They are concerned that a certain event might occur and they may not afford the consequences (i.e. contents insurance)
• They are worried that an event may occur that their loved ones cannot bear the burden of (i.e. life insurance)

In other cases, other parties may provide useful insurance. For example, your company may provide you with health insurance. Life insurance generally includes an endowment policy.