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Guide to Low Cost to Borrow

Since a couple of hundred pounds is a generally little level of obtaining, you may be enticed by a payday advance. This truly should be kept away from however, as it’s a costly type of obtaining – and an unsafe one on the off chance that you can’t clear the obligation in full before the month’s over. It could even influence your odds of getting a home loan now new more tightly principles have been acquired.

Contingent upon the amount you need to acquire, you may need to simply utilize a charge card as of now in your wallet. On the off chance that you can fork over the required funds before the end of month, this is a feasible alternative. In the event that you don’t clear the adjust, be that as it may, you can ordinarily hope to fork out enthusiasm at around 18%.

# …£1,000 to £7,500

At the lower end of this scale, a 0% purchase credit card can give you as long as 18 months to pay down the balance. For example, the Santander 123 Credit Card charges 0% interest on spending for 18 months, while paying cashback of up to 3.00% on travel and household bills.

If, for example, you wanted to borrow £1,000 for a new sofa, you could use the card to get one at John Lewis, give yourself a year and a half to spread the cost and earn 2.00% (£20) cashback in the process. You’ll need to clear the balance in 18 months, though, or else you’ll pay interest at a representative 16.5% APR.

If you are not buying anything but want to borrow to pay off more expensive debt for example, consider a card that offers 0% money transfers. A money transfer allows you to take agreed credit as cash from your card which is then paid directly into your current account.

Most of money transfer deals are offered by card giant MBNA which has just improved some of its football credit cards to now offer 29 months’ interest-free on cash transferred into your account for a 4% fee. You can read more about this in Les Roberts’ article. The best deal though (also from MBNA) is its Platinum Credit Card which offers 30 months at 0% on money transfers with the same 4% fee.

Another port of call for borrowing of this size is a personal loan. Loan rates have been plummeting recently – as we explain in our in-house research here – though the very cheapest deals (which are as low as 4.3% APR) are only available on borrowing between £7,500 and £15,000.

However, you can still borrow £3,000 over three years with Hitachi Personal Finance at a representative 7.8% APR, meaning you’d pay £374.28 in interest.

# …£7,500 to £15,000

This is perfect personal loans territory because, as we explain above, rates are at all-time lows. You can currently borrow between £7,500 and £10,000 over two to five years with Hitachi Personal Finance at a representative 4.3% APR.  At this rate, over five years, a £10,000 loan would cost you £1,131.33 in interest.

This is as low as loan rates get right now, but if you want to borrow between £10,000 and £15,000 there are still some decent deals to be had. For example, you can borrow between £7,500 and £15,000 over one to three years with Sainsbury’s Bank at 4.4% representative APR.

If you borrowed £12,000 over three years at this rate, you’d pay back a grand total of £12,831.37.

# …£15,000 to £25,000

At this borrowing bracket, a personal loan may still be an option as they tend to be capped at £25,000. Clydesdale Bank will lend you £20,000 over five years at a representative APR of 5.8%. The total charge for credit would be £3,005.29, which means you’d pay back a total of 23,005.29.

But in this and all other cases, the loan rate you get is entirely dependent on your income and personal circumstances. And only customers with the best credit scores will get access to the lowest loan rates.

…£25,000+

Anything above £25,000 and you’ll be looking at secured loans.

Secured or ‘homeowner’ loans offer a way to borrow larger sums of money by using your home as security. Because of this, they carry a greater risk than unsecured loans. In fact your home may be repossessed if you do not keep up with repayments on a mortgage, loan or any other debt secured on it.

Rates on secured loans currently range from around 5% to 8% and can be paid off over anywhere between one and 25 years. For example, you could borrow £30,000, secured against your home, over 15 years at a rate of 5.2% with Fluent Money. Over the term of the loan you’d pay £12,928.33 in interest.

If you are a homeowner though, and your current mortgage deal is approaching its end, it will almost certainly be cheaper to borrow a little extra when you apply for your next deal. Even if you haven’t paid much capital off your mortgage debt, your home may have increased in value sufficiently for you to qualify for the extra loan. And if you shop around and get a lower mortgage rate than the one you were on, you may even find your monthly repayments stay the same. Nevertheless, don’t take any extra secured borrowing lightly as it can really impact your flexibility and budget in the future.