Martin Lewis' logical money

Published Monday, 19 May 2014
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Common sense doesn't always do the job. There are times when you need to throw the logic book out the window and Money Saving Expert Martin Lewis has his top five counter logical cost cutting tips.

1. Borrow more and repay less

Usually if you NEED to borrow, ensuring you borrow as little as possible and repaying rapidly is best but this isn't always the case. Note the current best buys.

Borrow £1,000-£1,999: Sainsburysbank.co.uk, 18.5pc representative APR

£2,000-£2,499: Postoffice.co.uk, 14.9pc representative APR

£2,500 - £2,999: Hitachipersonalfinance.co.uk, 8pc representative APR

Near each threshold it is actually better to increase your borrowing to benefit from a lower rate. For example, borrow £2,499 at 14.9pc over five years and you repay £60 a month - £3,490 over the full term. Borrow just £1 more and the rate is 8pc, so you only repay £50 monthly - £3,020 over the term, £470 less.

Therefore, the cheapest loan for £2,170 and above is to borrow £2,500. Use a loan calculator to check if borrowing more costs less if you are near a threshold. Although it isn't sexy, if you do borrow more put the extra loan towards repayment.

Of course this does depend on you being accepted as all loans are representative rate, meaning only 51% of accepted applicants get the rate advertised.

2. Buy a boiler and big coats when it's sunny

This is more counter-seasonal than counter-logical but buying any item at the peak of its demand means high prices and less opportunity to haggle. So buy air conditioners and even convertible cars, if you're that lucky, in the winter. Conversely, arrange for your boiler to be fixed, buy heaters, and heavy coats in the summer.

Stockists have more time on their hands and specialists will have a likely need for cash flow, so haggling is more likely to work. Fittings appointments are often easier to come by, too.

3. Paying student loans upfront can cost thousands

With the deadline for new students in England to apply for finance by the start of term less than two weeks away, this is an important point to consider. Students in Scotland have until 30 June but, unfortunately, the deadline has passed for Wales and Northern Ireland.

With the cost of studying in England increasing, students starting university since 2012 can leave with loans of nearly £50,000 after three years. In addition, they pay above-inflation rates of interest, up to Retail Prices Index plus 3pc.

To beat the cost some parents are extending their mortgages or using their savings to help their children avoid this debt but this can be a costly mistake.

What matters is the amount to be repaid and not what is borrowed. Current repayments are 9pc of everything earned above £21,000 a year (likely to rise with earnings from 2017). Repayments continue for 30 years, unless the whole loan plus interest is cleared. Many won't repay in full before the 30 years is up.

An example for parents. If the £27,000 tuition fees are paid upfront, and their scholar becomes a poet and never earns above £21,000, the money is wasted. Even many earning over the threshold won't repay what they borrowed in real terms, so paying upfront would result in a loss.

If you are going to save up for your kids, then it's likely the money would be better used to provide a deposit for a house, or prevent other more damaging forms of debt.

4. Insure more drivers and pay less for your car insurance

Car insurance can be expensive, especially for young drivers but adding a second older more responsible driver - mum, dad or uncle - can cut costs

It's a case of trial and error. With some insurers mum drops the price and dad hikes it, and it may be the opposite with others. So using comparison sites helps.

As Mazzyb5 tweeted to me: "Took ur advice and added my mum to my car insurance and saved £500 #mumstheword"

A word of warning, however, never put someone as the main driver if they're not. That's called "fronting"; it's illegal and it can invalidate your insurance.

This is just the start of the counter logical tips that can save you money, see Martins full cheap car insurance tips for full help.

5. Buying two tickets for a train journey can be cheaper than one

Rail fares are not only expensive but they are incredibly illogical, with buying one ticket for a journey often more expensive than splitting the trip into several separate tickets.

This is called "split ticketing" and is allowed by the conditions of carriage: the only rule is that the train must call at the stations you buy tickets for.

For example, on a direct London to Durham return, when the cheapest was £301, buying four singles - London to York, where it stopped, York to Durham, and then in reverse - was £82 for the same trains at the same times, possibly even the same seats.

This is more art than science with even a journey slightly later may have different ticketing patterns so trial and error is the key.

© UTV News
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