Money Advice Service

If you need to borrow money, it’s important to understand how much the different options cost, how they work and whether you can afford the repayments. Look at these examples of three common types of credit and read our guides to borrowing money.

Interest-free credit card for balance transfers and new purchases

You might be able to transfer money you owe on an interest-charging credit card to an interest-free card. Interest-free periods are usually for a limited amount of time.

Sometimes, the interest-free period also applies to new purchases you make on the card but this might be for less time than on the interest-free period for balance transfers.

What’s it good for?

  • interest-free borrowing
  • planned purchases e.g, a holiday, new furniture and transferring existing credit and store card debt
  • spreading the cost of borrowing. If you can transfer the remaining balance at the end of the promotional period to a new 0% interest-free deal.

Things to be aware of:

  • You need to have a good credit rating and earning a minimum amount to be accepted for the best deals.
  • The interest-free period and the amount you can transfer will depend on your personal circumstances.
  • Read the terms and conditions carefully. Most cards do not offer the same interest-free period on both balance transfers and purchases.
  • You will go back onto the standard APR once the introductory period finishes. Make a note of when this is and switch to another interest-free card if you need to.
  • Although you won’t have to pay any interest on the amount you transfer or spend during the introductory period. But you’ll still need to pay a minimum monthly payment, normally 1%-2.5% of the balance.
  • if you miss your monthly payment, you might have to pay a late payment fee, typically £12, and you might no longer be eligible for the interest-free deal.
  • The 0% rate does not apply to cash withdrawals or getting money using credit card cheques.

Top tip

The best interest-free deals might be different for balance transfers and purchases. Consider taking out separate cards to take advantage of the longest interest-free periods.


Introductory interest-free period: 15 months

Average Interest rate (representative APR): 0% on a transfer value of £1,000 (plus a transfer fee, typically equal to between 2% and 3% of the balance)

Average APR of 17.7%1 beyond the 15-month introductory interest-free period.

Monthly repayment: £66.67**

** Assumes that the loan is repaid at the end of the 15-month promotional period.

Total amount repayable: £1,030 (£1,000 original loan + £30 one-off transfer fee based on 3%)

Find out more:

Borrowing £1,000 with an unsecured personal loan

What’s it good for?

  • budgeting – the monthly payment and interest rate are usually fixed for the term of the loan
  • planned purchases e.g. a car, home improvements or loan consolidation (bringing all your loans into one place).

Things to be aware of:

  • You might not get the APR advertised as it depends on your credit rating. Check the terms and conditions carefully before you accept the loan.
  • Taking the loan over a longer term reduces your monthly payments but you’ll pay back more in total.
  • Lenders generally charge a higher APR for smaller loan amounts (i.e. £1,000 or less).
  • £1000 is usually the minimum loan available from banks and other High Street lenders.

Top tip

Use our Loan calculator to work out different loan rates and repayment periods. You can save your results in a table to help compare costs.


Loan period: two years

Average Interest rate (representative APR): 18.6%

Monthly repayment: £50.00

Total amount repayable: £1,189 (£1,000 borrowed + £189 interest)

Find out more:

Borrowing £1,000 with a store card

Things to be aware of:

  • Borrowing on a store card can be very expensive, as they typically charge higher interest rates than credit cards.
  • Paying the minimum amount each month makes it look like the debt is affordable. But because the interest is constantly adding up, it will take you much longer to pay it all back.

Top tip

Transfer your store card balance to a 0% or lower-rate credit card. If you can’t do this, try to pay more than the minimum repayment each month.


Repayment period: two years

Average Interest rate (representative APR): 30%

Monthly repayment: £55.91

Total amount repayable: £1,342 (£1,000 borrowed + £342 interest)

Unless you know you can pay off the balance every month try to avoid store card debt if you can. This is an expensive way to get credit.

Find out more:

1. See Bank of England – table G1.3 - average quoted household interest rates for credit card

Next steps

This article is provided by the Money Advice Service.