When you’re borrowing money, it’s important to understand how much the different options cost and how they work. You also need to know how those costs vary depending on how long you want to borrow the money for.
What’s the best credit option for you?
Reason you need to borrow | Consider | Top tips |
---|---|---|
I want to buy something on credit and have flexibility in paying it back. |
Credit card – some have 0% deals on purchases over an introductory period (up to xx months). |
|
I want to borrow some money but pay back a fixed amount every month. |
Personal loan – might be cheaper than a credit card over a longer period or for larger amounts. The interest you’ll be charged might depend on your credit rating. |
|
I only want to borrow a small amount of money for a short period. |
Overdraft – some current accounts offer interest-free overdrafts up to an agreed limit. Other accounts charge fees as well as interest. |
|
I have existing debt I want to pay off as cheaply as possible. |
Balance transfer credit card – some cards allow you to transfer your debts and pay no interest for up to two years. That means they can be a cheaper option for paying off other debts. |
|
I want to deal with my debts as cheaply and simply as possible. |
Debt consolidation loans – are available, but it;’s usually best to get free debt advice, to help out your finances. |
|
I want to borrow but my bank won’t help. |
Credit unions – if banks can’t help, a credit union could be an option. These not-for-profit organisations usually serve a particular community. |
|
I’m struggling to pay my debts and living costs but I can’t get any more credit. |
An interest-free loan from the Social Fund, or help from your local authority or the Scottish and Welsh governments – if you’re on a low income and in real trouble, you might be eligible. You need to pay off as much of your debt as quickly as you can to try and bring it under control. |
|
Read the articles below to consider whether you really need to borrow money:
- Good debt versus bad debt
- Do you need to borrow money?
- Working out a repayment plan for money you’re borrowing
This article is provided by the Money Advice Service.