Managing your borrowing

Many people in the UK use borrowing to boost their finances. Credit cards, loans and arranged overdrafts are all types of borrowing. Borrowing sensibly can provide a welcome relief for a financial tight spot. Or simply help you to make the most of things. But how you manage your borrowing can make a big difference to your financial health.

If you’d like to get in touch with us about any financial concerns you have, please visit our Money Worries page.

Managing your borrowing effectively can:

• get you out of debt faster
• mean you pay less in interest
• help you to avoid additional charges from late payments
• prevent expensive patterns of borrowing like repeat use or persistent debt
• improve your credit rating and ability to get more credit
• stop you getting into difficulty repaying your debts
• make it easier to cope with unexpected expenses.

List all the people and companies you owe money to. Include as much information as you can, including what payments are due and when.

Plan payments, such as your mortgage or utility bills, to go out just after payday. This can make it easier to budget for the rest of the month.

To change direct debits, contact the companies and ask them to change the date. For mortgage, credit card or personal loans, contact your financial provider.

Text alerts can help you keep track of your account balance so you don't miss those all important payments.

Some types of borrowing have more serious consequences if you don’t keep up repayments. For example your mortgage, or repayments for a car you need to get to work. Keeping up with contracted repayments on these debts should be your priority.

You can find out more about priority debts on the Money Advice Service website.

Other types of borrowing such as overdrafts and credit cards are less urgent, but interest and charges will add up the longer you have them. As long as you’re on top of your priority borrowing repayments, reducing non-priority debts like these will save you money.

A budget is one of the best ways to get in control of your finances. It will help you to see where your money is going, how much you need to cover bills and essentials, and where you might be able to reduce spending.

Try the Money Advice Service Budget Planner

Add up the costs of each of your debts, and what your future charges are likely to be. This will show you where you can save the most money by reducing the cost of your borrowing.

• Nationwide loans calculator for an idea of the repayment cost of a Nationwide loan.
• Nationwide overdraft calculator for an idea of how much an arranged overdraft costs.
• Nationwide credit card fees and charges information.
• Our Banking app and Internet Bank for instant access to statements and account information. These include your exact interest rate for your Nationwide credit card, loan, mortgage and arranged overdraft.

Remember to keep up repayments on your borrowing commitments. Then focus on finding ways to reduce the cost of the most expensive borrowing.

1. Use any savings to pay off your debts. You’ll be paying more in interest on your debts than you’ll be earning on your savings. It’s still a good idea to keep some savings in case of unexpected expenses, such as a broken washing machine.
2. Look for ways to cut back on spending. Even small purchases can add up over the month. The extra money you save can be used to reduce your borrowing, saving you money in interest.
3. Avoid increasing your borrowing. Stick to your budget where you can. If you’re prone to an impulse buy, you could leave your credit card at home. Or reduce the amount of credit you have available.
4. If possible, increase your income. If you have the option to do extra shifts or overtime, use this money to reduce your debts faster.
5. Shop around for cheaper rates. If you can move your debts you could pay less interest. But look out for early repayment charges or short-term offers on interest rates which will increase later.

• How to make payments to your Nationwide credit card
• How to overpay your Nationwide loan
• How to reduce your Nationwide arranged overdraft limit

There are different types of borrowing designed to meet different needs. Using a form of borrowing in a way that it is not designed to be used can be expensive. It may make sense to switch to a different form of borrowing.

We've made a list of the different types of borrowing that could help you, depending on your circumstances. Make sure you consider the full terms and conditions when applying for any type of borrowing.

An overdraft is often used for short-term borrowing, emergencies and unforeseen costs.

Remember that:

• Overdrafts can be arranged or unarranged.
• Charges may apply if you use your arranged overdraft or if you go into an unarranged overdraft.
• Some providers will put a temporary block on your account if you’re in an unarranged overdraft.
• You should look carefully at the fees and interest charges when deciding whether to use an overdraft.
• Overdrafts are open-ended so it may take longer to clear the debt without a fixed end date.

A credit card is often used for short-term borrowing and making online purchases more secure. Store cards are also a type of credit card.

Remember that:

• Loyalty schemes are available.
• 0% interest and balance transfer offers are often available.
• To avoid penalty charges you should keep up with the minimum monthly payments.
• To reduce the debt over time you should make regular payments above the minimum monthly payment amount. This will reduce the debt quicker than just paying the minimum monthly payments.
• To avoid paying any interest you should clear the debt each month.
• You should check the small print.
• You should compare similar products.
• If borrowing a large amount, a personal loan may be a more cost-efficient option.
• Credit cards are open-ended so it may take longer to clear the debt without a fixed end date.

A personal loan is often used for larger amounts of money for specific purchases such as a new car.

Remember that:

• You should choose a licensed provider
• You should check the early repayment charges
• These are usually repayable in fixed monthly instalments.
• Personal loans have a fixed end date so may make it easier to track your progress against clearing the debt.

A mortgage is often used for a house purchase, remortgaging for better terms or a further advance (additional secured loan) on your original mortgage.

Remember that:

• A mortgage is a loan secured against your home
• Your home may be at risk if you do not keep up payments.
• Mortgages have a fixed end date so may make it easier to track your progress against clearing the debt.

A payday loan is a short-term cash loan until you next get paid.

Remember that:

• Payday loans are a form of short term borrowing, often with very high interest rates
• Payday loans may not be suitable for long term borrowing.

Unregulated and doorstep loans are short-term cash loans.

Remember that:

• These loans cost a lot in repayments
• They can put you under a lot of pressure to repay debts
• You should always check the provider is regulated by the FCA.

Signs that your borrowing may be unmanageable, include:

• being overdrawn most of the month
• debt not coming down over time
• struggling to make minimum payments.

It's called repeat use if you're often overdrawn for most of the month. It can be a sign that you're dependent on your arranged overdraft to get by.

We’ll write to you if we think you’re falling into a repeat use pattern on your Nationwide arranged overdraft. If you’re in repeat use, try to reduce your overdraft spending as soon as possible. Arranged overdraft charges add up over time, making it harder to stop repeat use the longer it goes on. You can use the tips on this page to help you get back on track.

Our overdraft calculator can show you how much you can save in charges. Either by reducing the number of days you’re overdrawn each month. Or by reducing the amount you borrow.

We want to help. The first step is to tell us about your financial situation (your income, outgoings and debts). Use documents like statements, bills, payslips to give us an accurate picture. Our dedicated team will then be able to talk you through your options.

Making minimum or low repayments on your credit card balance over a long period of time can result in persistent debt. This is where you're paying more in interest charges and fees than you're paying off your credit card balance. It's an expensive way to borrow. Find out more about persistent debt and how to manage it.

We understand that circumstances can change and sometimes the budget is just too tight. If you’ve missed monthly payments, or are concerned about being able to afford your borrowing with Nationwide, then get in touch. Our friendly team will do all they can to help.

For contact information please visit our Money Worries page.

If you have borrowing with other lenders you should contact them to discuss your repayments.

If you're worried about debt or money, you can get free, independent advice, online or over the phone, from:

• StepChange is a debt charity operating across the UK.
  StepChange Debt Charity
• Citizens Advice gives free, confidential information on money, legal and consumer problems.
  Citizens Advice
• National Debtline is a leading debt advice charity.
  National Debtline
• Money Advice Service is free and gives impartial money advice.
  Money Advice Service

You may be able to get face-to-face advice, although these services could be limited during the pandemic.