At this current moment in time there are many in the UK that need financial assistance. Thus many will consider going further into debt, or perhaps into debt for the first time. They will consider borrowing money. But what is the safest, most sensible way to do this in the current climate? We look at different ways to borrow.
The obvious starting point. We always suggest that you only take out loans if you are confident in making repayments. And that is the key to deciding whether you should take a loan. You should do so if you think your financial situation will improve in the future so that you expect repayments to be easy to make. If you have not budgeted for repayments, do not take out a loan. You are simply ignoring your problems and perhaps making them worse.
Credit cards, if used sensibly, are an excellent tool for those not awash with funds. There are multiple types for different needs, that can be tailored to your situation. You can buy cards that give rewards for purchases. Ensure you pay off your balance in quick time. There are those that allow 0% balance transfers, though there will be a one-off fee. This is usually calculated as a percentage of the amount transferred. And there are those that are competitive on interest rates.
The cheapest way to borrow is probably to utilise those you know. You avoid contracts, credit checks and probably interest charges too. However it can be awkward to approach those you know and love to ask for money. It is seen as you failing in life. And also it puts pressure on relationships. And those you ask may feel obliged to lend you funds when deep down they do not want to. So approach with caution.
This is a perfectly normal process that millions have utilised down the years. You may wish to do so to renovate your home or for funds elsewhere. Just be fully aware of the consequences of what you do. You are essentially putting back by many years the magical date of when you pay off your mortgage. So ensure that you do it for the right reasons. and are comfortable having the debt of a mortgage as part of your life for a lot longer.
Bank and building society overdrafts may be a normal part of many people’s lives. However, the rules have changed this year, and banks are moving towards a system that charges a set interest rate on overdrafts. and this is an eye-watering 40%. So with that in mind, they are to be avoided. However, with the pandemic, many of these plans have been postponed. Just be sure to check carefully the terms and conditions with your bank should you wish to utilise the feature. My bank Natwest is actually the best place to have debt right now as they have committed to not charging more than £20 a month in fees for overdrafts. This will change at some point though.
Another option is to buy now, pay later. A great option for those that have at least a satisfactory credit rating. However, again you must use them sensibly. This is not free money. Anything you buy will need to be paid off. And if not done quickly, it will attract high interest rates just like many other methods of borrowing. Be sensible and do not get carried away with a spending spree.