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Comparing ways of borrowing

 

Hire purchase

Normally items for which you pay over time, like a car, a sofa, and even some catalogue purchases.

Watch out for 0% finance deals, how long they are 0% finance and whether you will have the money for repayments afterwards.

Home credit

Money collected from you door.

High levels of interest.

Watch out! Although the weekly payments may seem affordable, you will be paying a lot more for this type of credit over the course of a loan.

Unsecured loan

Borrowing which is not secured against anything.

Varying rates of interest depending on amount and length of time.

Watch out! Lenders can take legal action if you don’t keep up repayments!

Credit cards

Lots of offers with varying interest rates.

Monthly repayments.

Watch out for varying rates on transferred cards, cash and purchases and introductory offers!

Bank overdraft

Linked to a current account, the bank agrees an amount you can go into the red by.

Cheaper form of credit – but you may pay a fee for using the facility and you will pay interest on it.

Beware: Offers to keep increasing your overdraft may tempt you to borrow more than you want.

Other forms

Informal lending from friends or relatives – watch out for strain on the relationship.

Loan sharks – watch out! Often resort to violence and threats.

Pawnbrokers – watch out! You might lose the item you pledge and your money too!

Social fund.

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