Your borrowing options
There are lots of reasons you may want to borrow money, from a new car, to home improvements or a surprise bill. Whatever your situation, it’s important to understand how you can finance your needs.
Credit cards
You can use a credit card to spend up to an agreed credit limit and pay it back later. If you owe money, you have to make at least a minimum payment – a percentage of what you owe – each month. If you don’t repay it in full each month, you’ll usually be charged interest.
Pros
Some cards offer interest-free purchase or balance transfer periods and reward programs
Flexible monthly repayments
Cons
Interest can stack up over time if you only make the minimum payment each month
Personal loans
A loan is where you borrow a set amount of money for an agreed amount of time. You pay back the full amount – usually in monthly instalments – plus interest. For most fixed-term loans, the amount you pay and the rate of interest is fixed at the outset and won’t change until it’s paid off.
Pros
Suitable for large purchases or consolidating existing borrowing
You know exactly how much you need to repay each month
Cons
Less suitable for smaller purchases eg less than £1,000
Less suitable for short-term borrowing eg less than a year
Overdrafts
Bank accounts with arranged overdrafts let you continue spending money from your current account when your balance falls below £0. To help you manage unexpected bills, your arranged overdraft will usually include an interest-free buffer. But once you pass that amount, you’ll be charged interest.
Pros
Some bank accounts offer interest-free buffers on their arranged overdrafts
Emergency budgeting
Cons
Not good for long-term or regular borrowing
High interest rate, where interest is charged
Borrow more on your mortgage
Borrowing more on your mortgage involves taking on more lending from your current mortgage lender. Typically with a mortgage, you'll pay the loan back on a monthly basis and you'll need to make sure you can afford your repayment because it is secured against your home.
Consider this option for larger purchases with repayment over a longer period, typically over £10k and 60 months.
Pros
Frees up funds for large purchases
Usually lower interest rates with longer repayment periods available
Cons
Paid back over longer period therefore could pay more interest
Secured against your home, so you could lose it if you miss payments
Next steps
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up with repayments on your mortgage.
| Reason to borrow | Credit card | Personal loan | Overdraft | Borrow more on your mortgage
This borrowing is secured against your property. |
|---|---|---|---|---|
| Buying a car | (if the car's low value, or there's a purchase offer on card |
(for larger purchases with repayment over a longer period) |
||
| Holiday and flights | (for larger purchases with repayment over a longer period) |
|||
| Day-to-day spending |
(if you repay your balances each month) |
|||
| DIY projects | (for larger purchases with repayment over a longer period) |
|||
| Buying appliances or technology | ||||
| Debt consolidation | (if there's a balance transfer offer) | (for larger loans with repayment over a longer period) |
||
| Vehicle repairs |
(if cost can be repaid in the short-term) |
|||
| Unexpected household / utility bills | ||||
| Moving costs | ||||
| Home renovation / improvements | (for larger projects with repayment over a longer period) |
|||
| Wedding expenses | (for large expenses with repayment over a longer period) |
| Reason to borrow | Buying a car |
|---|---|
| Credit card |
(if the car's low value, or there's a purchase offer on card |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for larger purchases with repayment over a longer period) |
| Reason to borrow | Holiday and flights |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for larger purchases with repayment over a longer period) |
| Reason to borrow | Day-to-day spending |
| Credit card |
(if you repay your balances each month) |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
|
| Reason to borrow | DIY projects |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for larger purchases with repayment over a longer period) |
| Reason to borrow | Buying appliances or technology |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
|
| Reason to borrow | Debt consolidation |
| Credit card | (if there's a balance transfer offer) |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for larger loans with repayment over a longer period) |
| Reason to borrow | Vehicle repairs |
| Credit card | |
| Personal loan | |
| Overdraft |
(if cost can be repaid in the short-term) |
Borrow more on your mortgage
This borrowing is secured against your property. |
|
| Reason to borrow | Unexpected household / utility bills |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
|
| Reason to borrow | Moving costs |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
|
| Reason to borrow | Home renovation / improvements |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for larger projects with repayment over a longer period) |
| Reason to borrow | Wedding expenses |
| Credit card | |
| Personal loan | |
| Overdraft | |
Borrow more on your mortgage
This borrowing is secured against your property. |
(for large expenses with repayment over a longer period) |
