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What is Cashflow, and How Does it Affect Your Need to Borrow Money?

Cashflow is an important part of managing your personal finance, but all too often it’s not fully understood and that can lead to some serious problems with debt and credit rating. That’s why we’re here to explain it to you in simple terms.

What is cashflow?

Cashflow, in simple terms, is money in versus money out during a certain period of time. That means if you spend £500 one week and add £900 to your bank account that same week, you have a positive cashflow of £400 for that week – you’ve spent within your ability and you’ve got some money carried over to the next week. But sometimes surprise expenses can make it difficult to maintain a positive cashflow, and that can damage your savings or put you into overdraft on your accounts. For example, if you put £1000 in your account one week but your car breaks down that same week and you need to spend £1200 to fix it, you’ve got a negative cash flow.

Why is cashflow important?

Say you own some property like a car or a house, you may ask yourself “my debts are less than how much my property is worth, why do I need to worry about cashflow?”. Well the answer to that is: you don’t want to have to sell your house to pay for your car breaking down! Properties like cars and houses represent non-liquid assets. This means they’re things you own that are hard to convert directly into cash – selling a car or a house can take months and often you’d rather have the property than the entire sum of cash it’s worth. This is where guaranteed short-term loans come in handy. Direct short-term lenders can allow you to borrow money for anywhere from 14 days to 3 months with dynamic interest rates, balancing out your cashflow.

Balancing your cashflow with direct short-term lenders

Direct short-term lenders can help you “balance out” your cashflow by allowing you to borrow money instantly and make sure you’ve got a positive cash flow before you get paid. This allows you to pay for groceries, petrol, and surprise expenses without worrying about damaging your savings or credit rating by going into overdraft. The best loans can have the money deposited in your account within minutes, all done online from the comfort of your own home.

Instalment loans

Normally you can take out a quick loan to be paid out within 14 or 28 days, but you can also take out instalment loans which can be paid off over a period of months, which gives you a lot more time to pay off your loan. Fernovo is a direct short-term lender that does both, including loans upwards of £500 which can be paid out periodically over several months. This increases your positive cash flow when you need it most and prevents you from having to sell assets or not being able to pay that essential expense.

Now you realise what cashflow is, and how it’s important to have a positive cashflow in order to pay for your basic needs like groceries or petrol. You’ve also learned an easy way to balance out your cashflow, borrowing money through direct short-term lenders. Hopefully this helps increase your financial abilities and freedom.

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