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13 brilliant ways to borrow

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On 22 January 2013


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If you need some money take a look at our ideas for the best ways to borrow.

Sometimes, no matter how hard you try, your finances just don’t have enough give and you may need to borrow money.

Here are 13 brilliant ways you can go about it.

0% money transfer

A money transfer is a good way of lifting funds from your credit card interest-free.

Unlike a balance transfer, which moves debt from one card to another, a money transfer moves money from a credit card into your bank account.

Currently the MBNA 23-Month Platinum Visa Card offers the best deal on money transfers. You can transfer money to a bank account and not pay any interest on the balance for 23 months. That's almost two years free of worrying about interest payments.

However there is a handling fee of 4% to pay, which is a fairly common price on money transfers at the moment. So if you needed to transfer £2,000 from the credit card into your bank account you would pay £80.

Check out The best money transfer credit cards for more.

0% purchase card

The 0% purchase credit card is a great way to borrow cheaply for a few months.

The buy now pay later mentality can still work, so long as you have a plan on how to pay it all back within the limit set by the issuer.

Currently the Tesco Clubcard Credit Card for Purchases offers a whopping 16 months interest-free on purchases.

That gives you more than a year to pay back whatever you borrow on the card. Make sure you keep to the timeframe though as you will be hit with an interest rate of 16.9% once the offer ends.

Check out The best 0% purchase credit cards.

0% balance transfer and purchase card

Ok so this doesn’t sound like the best way to borrow as a balance transfer credit card is designed to help you freeze expensive existing debt, not borrow more.

But some cards can give you the best of both worlds; 0% on balance transfers as well as 0% on new purchases.

Currently the best on the market is the Halifax All in One Online MasterCard. It comes with 15 months 0% on balance transfers (with a 3% fee) and 15 months 0% on new purchases.

That’s over a year to freeze the size of an existing debt while being free to enjoy 15 months interest-free on any new purchases you might need to make in that time.

Low APR credit card

If you know you won’t be able to stick to an interest free time limit then a low APR credit card might be more useful to you.

The Sainsbury’s Low Rate Credit Card comes with a market-leading low 6.9% APR.

So instead of facing normal interest charges of around 18.9% you can keep debt manageable with a low APR for the lifetime of the debt.

Credit builder card

For those with no credit history or one that has been damaged it can be extremely difficult to borrow.

With a credit builder credit card you can restore or build up a good credit profile and get access to some funds at the same time.

However, the APRs on these cards tend to be quite high – usually around 34.9% - to encourage good habits. And the credit available tends to be around £1,500 depending on your circumstances.

You could try going for the aqua Classic MasterCard which comes with a relatively low APR of 29.7% and a limit of up to £1,600.

The aqua card could enable you to start borrowing even if you have had a CCJ, are on a low income, or if you have no credit history. For more read Best credit cards for bad credit borrowers.

Cashback and reward credit cards

If you're a good borrower and don’t need long interest-free periods you can be rewarded for the borrowing you do instead.

The Santander 123 Credit Card offers up to 3% on everyday spends at the supermarket, on travel and at department stores. But you will have to pay £2 a month to use the card unless you also have a Santander 123 Current Account. There are plenty of other cashback cards worth a look - read The best cashback credit cards for a full guide.

Elsewhere the Lloyds TSB Duo Avios Credit Card rewards borrowers with 18,000 Avios once they have successfully applied. That’s enough for two return flights to Paris or Amsterdam. When you start spending you can earn a further one Avios for every £1 spent on the American Express part of the duo and one Avios for every £5 spent on the MasterCard.

Check out The best reward credit cards.

Unsecured personal loan

It is now cheaper than ever before to borrow via a personal loan.

With a personal loan you know exactly how much you need to pay back each month and can borrow up to £15,000.

Currently  Clydesdale Bank is offering a market leading rate of 5.1% for those that need to borrow between £7,500 and £15,000 over 12 to 72 months.

Borrowing £7,500 over three years with Clydesdale would cost £224.73 a month and the total amount repayable would be £8,090.28.

It's not the only lender with a rate that low though, as we explain in Sainsbury's cuts loan rates to just 5.1%.

Secured loan

If you weren't able to get an unsecured loan but have collateral like property or a car you could try and get a secured loan.

Usually those wanting to consolidate debt, make big home improvements or make a big purchase might go down this route.

The benefits are that you can get one with an imperfect credit rating, rates are relatively low (Nemo is offering 8.5% APR on a £2,000 loan over two years) and there are longer repayment periods.

But the rates are variable, meaning you might not be able to keep up with repayments and if that happens you will lose whatever you secured the loan with, which in the worst case could be your home.

Credit union loan

A credit union is designed to allow people in a local community, workplace or other organisation to save and borrow money.

The rates on offer from a credit union are usually better than what you would find using a traditional unsecured personal loan especially on smaller amounts. Plus there are no early repayment charges and some only charge interest on the balance outstanding.

The interest rates available will vary between credit unions but you can get an idea using the loan calculator on the Association of British Credit Unions Limited (ABCUL) website.

At the moment if you wanted to borrow £2,000 over two years a credit union might offer a rate of around 12.7% whereas in the unsecured personal loans market the best rate on offer (bar peer-to-peer lending) is 18.6%  from Sainsbury’s Bank.

To find your nearest credit union visit Find Your Credit Union or the ACE Credit Union Services website.

Peer-to-peer loan

Another way of getting a loan at a low rate is to get a peer-to-peer loan.

Like a credit union loan, a peer-to-peer loan involves ordinary people who want to save or borrow at a reasonable rate, but you don’t need to be part of a group to qualify. You just need a good credit score if you're a borrower or a bit of money to invest if you're a saver.

Companies like Zopa and RateSetter provide a platform for those with money to invest to meet those who need to borrow. Both parties are usually able to get a much better rate than anything on offer from their bank or building society.

Currently you can borrow £2,000 over two years for a rate of 10.8% with Zopa or 10.7% with RateSetter.

Interest-free overdraft

Using your overdraft is a good way to borrow money in the short term. 

At the moment if you switch to a Halifax current account you can get £100 and access to a 12-month interest-free arranged overdraft. Depending on your circumstances the maximum Halifax is willing to lend is £5,000!

Elsewhere those opening a First Direct 1st Account can get an even better £125 for switching and access to a £250 interest-free overdraft.

Alternatively if you only need a short amount of time you can use the Santander 123 Account, which comes with a four-month interest free overdraft.

Make sure you agree the amount with your bank beforehand though, as an unauthorised overdraft will incur hefty charges.

The Government

If you are really struggling the Government has a variety of interest-free loans available that might be able to help you.

A Budgeting Loan can be granted for essential things like rent, furniture, clothes and hire purchse debts. This loan has to be repaid within 104 weeks which gives you two years. This sort of loan is only available to those that have been receiving income related benefits for 26 weeks.

Elsewhere a Crisis Loan can help with the essential costs after an emergency or disaster in your home. This could be a flood or fire but you’ll only repay what you borrow which is agreed at the time.

Friends and family

Opinion is split about whether borrowing from friends or family is a good idea.

On the plus side most family and friends won't charge you interest or take your car if you don’t pay them back. However, you risk ruining your relationship if the deal goes bad.

If you have to go down this route make sure you agree some ground rules and make it more binding with a promissory note.  

For more read: Borrowing money from family and friends: how to do it right.

More on borrowing:

Three ways to get an interest-free loan

Capital One Balance Visa: new 0% credit card for bad credit borrowers

Fix your mortgage at less than 2%

Barclays Family Springboard: buy a house with 5% deposit

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