Borrowing money
Chances are you’ll need to borrow money at some point. But who
you borrow it from can make all the difference between a good loan
and a bad loan.
When borrowing money there are four things you
need to be aware of:
- The annual percentage rate (APR), which is the
interest you will pay for the loan over a year.
- The time span of the loan and the
frequency of payments.
- How much each repayment will be.
- Any extra charges, such as missed payment
penalties or charges for setting up the loan.
Why is the APR
important?
Basically, it’s the easiest way of working out
which loan is cheaper – usually, the lower the APR, the cheaper the
loan.
The table below shows an example of the total
cost of the same loan through different lenders:
| Payment method |
Cost of cooker |
Interest rate (APR) |
Weekly repayments |
Total paid |
| Cash |
£300 |
0% |
N/A |
£300 |
| Catalogue |
£350 |
29.9% |
£7.73 |
£402.14 |
| Credit union |
£300 |
24% |
£6.47 |
£336.43 |
| Hire purchase |
£350 |
34.5% |
£7.87 |
£409.46 |
| Social fund loan |
£300 |
0% |
£3.85 |
£300 |
| Store card |
£300 |
29.9% |
£6.63 |
£344.69 |
| Doorstop money lender (loan shark) |
£300 |
177.7% |
£9.61 |
£499.81 |
Find out more
about the different ways to borrow money...