The average contractor working through an Umbrella Company may well face periods of worklessness every so often which can last anything from a few weeks to a few months, especially in the current economic climate. But mortgages, council taxes, grocery costs and much other expenditure have a relentlessly clockwork regularity to them, blithely indifferent to the vagaries of contract jobs.
In the past, many contractors have survived by taking out loans to help them over the lean times. However, new advice from the financial guidance website Candidmoney.com suggests that this may no longer be the wisest option if you’ve got savings to turn to instead. The reason? Preserving savings by taking out personal loans is nowhere near as financially viable as it once was. The average savings account is paying a feeble 0.1 per cent in interest, principally because the bank of England is maintaining interest at the record-breaking low of 0.5 per cent. But the interest payments you’ll be required to make on personal loans, by contrast, are over 160 times greater, at 16 per cent plus. You don’t have to be an accountant to work out that this inevitably means you’ll end up shelling out much, much more in the long run with a personal loan.
So if you’ve got a stash of savings available, it makes more economic sense to plunder your piggy bank on occasions than to plunge yourself into long-term penury with a loan. And you won’t be alone – 31 per cent of UK adults dipped in to their investments or savings over the last month to help make ends meet, according to a study conducted by Schroders.
