Different ways to borrow
What does it all mean?
Here's an overview of the different ways you can borrow
money.
Banks / building society loans
Usually have a lower rate of interest, but
don’t offer loans for less than £1,000.
Catalogues
Convenient weekly payments but the goods tend
to be more expensive. You can get better deals on the high street
or internet.
Credit cards
A fairly low interest rate means they can be a
cheap way to buy BUT only if you can clear the balance quickly. If
you only make the minimum repayment, the interest and charges can
mount up and the total balance owing will only go one way – up.
Credit unions
Interest rates are fairly low and you can
borrow small amounts, but this usually depends on what they think
you can afford to repay.
Hire purchase
Often available in places such as furniture
shops or car dealerships. Low weekly payments are offered with no
credit checks therefore interest rates are high and goods,
expensive. Plus, if you don’t keep up repayments your purchase can
be repossessed. The goods you buy are not yours until the final
payment has been made.
Moneylenders / doorstep lenders
Affordable weekly payments and collectors call
at your home, but interest rates are very high and you may pay a
lot more than you need to.
Social Fund loans / grants
If you are on Income Support, Job Seekers
Allowance, Employment and Support Allowance or Guaranteed Pension
Credit you may be entitled to a community care grant or budgeting
loan from the Department for Work and Pensions. You don’t have to
pay back a grant and loans are interest free with repayments
deducted from your benefits. There are also crisis loans available
but you’ll have to provide evidence of the crisis to qualify.
Store cards
Similar to credit cards but the interest rates
are usually higher. Often, you can only use them in that store or
group of stores.
Loan sharks / illegal moneylenders
Sometimes called ‘friends of friends’, these
rogues have no credit licence and can’t legally loan money.
They will have little or no paperwork and the
interest rates can be astronomical. Failure to meet payments can
result in intimidation or violence.
If you think you have borrowed money from an
illegal lender, please contact the Illegal Money Lending Team on
0300 555 2222 who will be able to help you.
Find out more about loan
sharks