Cheap ways to borrow
So, what’s the cheapest way to borrow money? Well, it’s all down to how much money you need, and what type of borrowing is right for you. Let’s take a look at different ways of lending to help you make the right choice.
The upside is a personal loan makes a purchase affordable by spreading the cost and if you have a good credit score, you might have access to better interest rates.
The downside is the loan repayment terms are shorter, and that some forms of lending and the top deals might only be available to those with high credit scores.
The upside of taking out a secured loan is that you can potentially borrow larger sums of money, depending on the value of the property or land it’s secured against. Secured loans often come with longer loan terms, and sometimes give you access to lower interest rates.
The downside is a secured loan is secured against your property, so your home may be repossessed if you do not keep up the repayments on a mortgage or any other debt secured against it. Also, longer loan terms might mean you end up paying more money back overall.
The upside with 0% interest credit cards is that you won’t pay any interest on your borrowing for a set period of time.
The downside is that you can’t usually borrow large amounts of money on a credit card. It’s also worth noting that 0% interest credit cards won’t be interest free forever, and the interest rate will rise after the promotional time is up.
The upside of having an overdraft is that it provides you with flexibility as you are able to change the amount borrowed within limits. Interest or charges are generally only payable on the amounts borrowed.
The downside is an overdraft can’t normally be used for large amounts of borrowing. Rates of interest are normally higher than those charged on personal loans. Banks can also change the limit of the overdraft at any time or ask for the money to be paid back in full sooner than expected.
There are several organisations that can help you take back control of your financial situation. For free, impartial advice on what to do next, visit Citizens Advice or the Money Advice Service.
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