Borrowing basics

Borrowing tips

Borrowing tips

The information in this guide was last updated on 26/02/2014

Work out exactly what you actually need to borrow and stick to it.

Make sure you can meet the monthly repayments. To get an idea of your incomings and outgoings, see our budget planner.

A fixed rate means you know your repayments will stay the same. A variable rate means your repayments can go up and down.  Some products may offer a low introductory rate for a fixed period, but after that charge you more.

If you think you’re going to go overdrawn it’s always best to apply for an arranged overdraft.  If you are accepted it could help avoid fees incurred as a result of going into an unarranged overdraft.

Remember that the total cost of borrowing includes interest and fees as well as the amount you borrow. Also, be aware that the advertised rate (representative APR) is not necessarily the one you will be offered. It will depend on the risk the lender feels you represent. So the real costs may differ quite a lot from what you first expect.

Look at your finances and decide what would work best for you. Are you borrowing a small or large amount? Would a low overall interest rate or low monthly repayments be better? See our overview of different types of borrowing.

Lenders use your credit rating (and the information from your application form) to calculate the ‘risk’ of lending to you. By checking and taking steps to improve your credit rating you may qualify for better interest rates. Read our tips for looking after your credit rating.

Lots of companies will offer 0% interest for a fixed period of time. You can put a reminder in your diary to make sure you don’t miss the opportunity to pay the money back within this period, as the interest that you might have to pay afterwards could be a lot higher. 

Finding a loan

You can shop around quickly and easily using online comparison tools. By entering a few basic details you’ll be given a list of deals to consider. You can usually compare loans by criteria including:

  • loan type
  • minimum and maximum loan amounts
  • rate type
  • monthly repayments
  • total payable. 

Download our spending wisely guide

Our Spending wisely guide provides an easy, step-by-step guide to the different borrowing options available.

Choosing a lender

Only deal with lenders who are properly regulated, and who are committed to helping you make financial decisions that best suit your circumstances. Don’t sign anything until you have considered all your options and avoid lenders that charge exceptionally high APRs.

Dealing with repayments

If you’re having trouble meeting monthly repayments, speak to your lender about smaller repayments, rearranging the term of your loan, or a payment holiday. If you miss a payment, let the lender know and try to make sure you make the payment the next month.

Different types of borrowing

Borrowing sensibly