The impact of inflation on borrowers has been significant, especially in the past few years. With rising interest rates, property prices and monthly expenses, the UK inflation rates are affecting a massive part of the economy.
However, despite the term often making headlines, many people struggle to understand exactly how inflation affects them. That’s why, we bring you this article, discussing the impact of inflation on your daily lives and financial situation.
We will also explore the intricacies of the concept in an attempt to curate strategies that help us battle the negative impact of inflation. Regardless of whether you are an employee or a small business owner, this blog will help you protect your financial interests and deal with inflation effectively.
Understanding Inflation: The Basics
Inflation has been a significant aspect of the economy ever since the invention of money itself. Representing the gradual increase in prices of goods and services over time, inflation impacts the buying power of the consumer. If you’ve heard of the cost of living crisis, then it is important to know inflation is at the heart of this crisis.
While a reasonable amount of inflation is a healthy sign of economic growth, problems ensue when the rate of inflation outpaces the rate of income growth. This can be a result of a wide range of factors including increased demand, decreased supply, government monetary policies, increased production costs and so much more.
Although the impact of inflation may seem like a complex concept, the way it affects your daily life, ability to borrow and financial future is rather simple.
Now let’s explore that.
How Inflation Affects Your Everyday Expenses
Inflation comes in many different forms and is often overlooked in daily expenses. However, even the smallest expenses impact your financial health.
For example, the groceries you buy cost more than they did last year. However, has your income increased in the same proportion? Now, what about the petrol in your car? Or the cost of dining out on the weekend? Are you noticing increased prices everywhere?
Are daily expenses pinching you a little more than they used to? That’s when you know you’re suffering from the negative impact of inflation.
Although the change in price is subtle, it gradually ends up diminishing the value of your money. However, it is important to note that the impact of inflation is not limited to your daily life, but also to bigger one-off financial expenses. With a rise in interest rates and mortgage rates, inflation is also affecting people’s ability to get a home loan or borrow money. Let’s find out how.
Loans and Inflation: What Borrowers Need to Know
If you're a borrower, you'll find that inflation has a direct bearing on your loans. As prices rise due to inflation, the value of money decreases.
How does this affect your loans?
On the plus side, the money you pay back on your loans may have less purchasing power than the money you initially borrowed. In other words, your debt could become relatively cheaper over time, but there's a catch.
The impact of inflation on your loans depends on the type of interest rates you have. Some loans come with fixed interest rates, while others have variable rates. These differences can significantly influence how inflation affects your loan repayments. Therefore, it's crucial to understand your specific loan terms to make informed financial decisions.
Strategies to Counter Inflation's Impact
While there are a number oftips to effectively deal with inflation, in this section we will discuss a few simple ones.
Budgeting: One of the most important aspects of money management is budgeting. By accurately assessing your income and expenses, you can eliminate unnecessary spending and save more money.
Savings: By increasing your savings, you can build yourself a nest egg and an emergency fund to deal with unexpected expenses. Moreover, it will also help you plan a future with greater financial freedom.
Preserving Your Money’s Value: If you’re thinking that saving money is only going to diminish your money’s value over time, you’re right. That’s why it becomes essential to look for investment opportunities that are safe and can help preserve the value of your money.
Choose Salad Money To Battle Inflation and Manage Your Finances
Now that you know all about the impact of inflation on borrowers, it’s time to use our strategies and effectively manage your finances. While inflation is not a force that can be underestimated, with the right approach you can mitigate its impact on your financial future.
However, inflation is not always kind to everybody and we recognise that. That’s why, in certain trying times, if you find yourself in need of urgent financial assistance, Salad Money is here to help.
As one of the leading low-credit lenders in the UK, we can provide public and private employees with emergency payday loans regardless of their credit score.
At Salad Money, we realise that the credit score system can be an unfair way to determine your loan affordability. That’s why we rely on our unique affordability assessment system that does not take your credit score into account. Thereby, allowing us to accurately assess your creditworthiness.