Borrowing money
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Ways to borrow
Type |
Points to consider |
More information |
|---|---|---|
Social Fund loan |
May be available if you are on a low income and getting state help. Can be for many purposes, for example buying furniture or household goods, home repairs, cost of getting back into work, removal costs or to cope with a short-term emergency | Jobcentre Plus/ Jobs and Benefits Office |
| Family and friends |
If you can’t repay, you risk losing their goodwill or friendship and may cause them hardship | |
| Bond committees, ‘partners’ and similar schemes |
Informal community organisations. Usually you commit to paying a set amount each week or month into a central fund and can borrow from the fund | Ask in your local community |
Credit unions |
Formal community or work-based organisation. You may need to commit to saving as well as paying off the loan. PPI is included free | Association of British Credit Unions Ltd (0161 832 3694 or www.abcul.coop) and Useful contacts |
Mortgage or secured personal loan |
From banks, building societies and other lenders, and is secured on a house. If you don’t keep up the payments, you may lose your home |
For mortgages see www.fsa.gov.uk/tables. For other loans see money pages of newspapers or several comparison websites |
| Hire purchase |
Used to buy cars, TVs, furniture and so on. You do not own the goods until you have paid the last instalment. If you do not keep up the payments, the goods will be reclaimed | Shop or firm selling the goods |
| Shop credit |
Often 0%-credit period, but if you have not paid in full for the goods in that time, charges can be steep | Shop selling the goods |
| Credit card |
Very flexible – within limits, you borrow and pay off what you like, when you like. Can be cheap if you pay off in full each month, but costly if you don’t. For best rates, you usually need a good credit record | For best rates, see the money pages of newspapers, or several comparison websites |
| Unsecured personal loan |
Loans from retailers are not necessarily the cheapest. Offered also by banks and similar lenders – you do not have to stick to your own bank. These are not secured on a property. For best rates, you usually need a good credit record | For best rates, see the money pages of newspapers, or several comparison websites |
Overdraft |
From your own bank. Lets you spend more than in your current account. Reasonable cost if you talk to your bank first (authorised overdraft) but expensive if you don’t (unauthorised overdraft) | Bank where you have an account |
Catalogue shopping |
Convenient because you can pay in small amounts over a long period, but the total cost is likely to be more than you’d pay in shops | Catalogue firm selling the goods |
| Store card |
Most work like credit cards but interest rate tends to be higher. Best avoided | Store offering card |
| Door-to-door lender |
Convenient because you can pay in small amounts over a long period, but interest rate is very high. Best avoided | Lenders generally target you |
| Loan shark |
Illegal lender. Likely to use criminal tactics if you can’t repay. Avoid | See www.direct.gov.uk/ stoploansharks |
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Do you work with families?
If so, we have some extra information and resources for you.