What should I look out for if I need to borrow money?

If you find that you need to borrow money, the Money Advice Service has some suggestions. Make sure that you:

  • Spend time shopping around. Research what’s on offer and get advice.
  • Always look at the total amount you will have to repay and the amount you will have to pay back each week/month. A shorter repayment period or lower repayments may be better than a slightly lower annual percentage rate (APR).
  • Make sure you know the difference between secured and unsecured lending. When you take out a secured loan, you could put your home at risk.
  • Think carefully before you take out payment protection insurance on a loan. They can be very costly and won’t necessarily cover all changes in your circumstances. Read all the terms and conditions to make sure they apply to you and think about whether you have any other policies which will cover you if you can't keep up the loan repayments.
  • Never borrow money on the spur of the moment.
  • Be wary of interest-free deals. They are only interest-free if you pay them off within the time period. If not, they can be very expensive.
  • Watch out for the offer of 'payment holidays' on credit card and loan agreements. What seems like extra money in your pocket is actually a way to make sure you pay more interest to your lender.
  • When taking out a mortgage with variable interest, ask what your monthly payment will be if the rate goes up by 2%. If you would find it impossible to pay this, consider whether a fixed interest rate makes more sense for you.
  • Always try and pay at least 10% of your balance every month on your credit cards.
  • Find out about alternative sources of borrowing – is there a credit union you could join in your neighbourhood or workplace?
Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.