Martin Lewis explains how to borrow money without paying interest
Martin Lewis revealed a number of ways people can borrow at 0% interest.
The Money Saving Expert (MSE) founder says borrowing is “very cheap right now”, although he warned people not to take out loans unless absolutely necessary.
He continued, “Make sure it’s a planned purchase, with affordable and budgeted repayments. Borrow the minimum necessary and repay as quickly as possible. If in doubt…don’t! “
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According to MSE’s latest newsletter, the key to borrowing is “of course to get the lowest rate possible”.
By doing so, more of your repayments wipe out the actual debt, rather than covering the interest.
Getting a 0% credit card with 22 months interest free and £25 cashback was one of the tips Martin gave.
Here are some of the ways you can borrow without paying – or paying very little interest:
0% credit card
These are best used to borrow from £100 to – all at once – £5,000.
Done right, they offer super cheap loans, with no fees for almost two years.
To use this route, you will need to be able to refund what you need to borrow on the card.
You can also check your eligibility without having to apply.
The downsides are that it’s easy to overspend and borrow too much, repayments aren’t fixed, and not everyone can get one.
The current top pick is M&S Bank’s 22 Month 0%, which gives accepted beginners the full 22 months, and if you spend £100+ in the first 90 days (probably if you’re using it to borrow) you get £25 cashback on top of regular rewards points.
The 0% is only for spending on the card, not for withdrawing money, so avoid that.
Cheapest loans ever
These are best used to borrow from £3,000 to £25,000. This is your primary route to a larger loan.
Although a card can be useful for replacing a broken refrigerator, a loan is a better option if, for example, you need to replace an entire kitchen.
Unfortunately, there’s no way to do that at 0%, so think twice before you jump in – although rates are historically cheap right now.
Current best deals (all are representative APRs):
£1,000-£3,000: Hitachi 9.8%
£3,000-£4,999: Hitachi 8.1%, AA, Post Office, MBNA 8.3%
£5,000-£7,499: Sainsbury’s (for Nectar holders) 3.3%, AA 3.4%
£7,500-£15,000: Cahoot* and Santander 2.8% + they let you CLAIM a £50 Amazon voucher (counted on a £10,000 loan over 3 years, this is equivalent to 2.5% )
£15,001 to £20,000: Cahoot 2.8% + CLAIM £50 Amazon voucher and MBNA, TSB, Tesco 2.8%
£20,001 to £25,000: MBNA, TSB, Tesco 2.8%
Overdrafts can come with astronomical interest rates, but there are currently two bank accounts that pay over £100 and offer 0% overdrafts.
So you can use the switch incentive to reduce debt and the rest is free.
It’s hard to get it right, but if you can, it’s unbeatable for small loans.
The best offers of the moment:
Free First Direct £130 plus £250 overdraft at 0%*
Until November 22, switchers get £130, and many get a continuous interest-free overdraft of £250 (40% EAR on top).
If your loan is less than £350, then it’s a good deal because the £130 will clear some of the debt and the rest is interest free.
FlexDirect Nationwide Free £100+ and 1 Year 0% Overdraft.
Switchers receive at least £100 and often a 0% overdraft over a year. The amount of overdraft depends on a credit score, but for some it may be higher than First Direct – although it’s worth using its own eligibility tool to get an indication before applying.
After a year it’s 40% EAR, so make sure the debt is cleared by then.
For more advice on borrowing at 0% interest, visit MoneySavingExpert.com
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