The cheapest way to borrow money if you’re struggling and need extra money
If you’re having trouble and need extra money, we’ll explain the cheapest way to borrow money.
A word of warning – only consider borrowing money if you really need it.
For example, if your car breaks down or your washing machine breaks down.
If you’re considering borrowing money to pay for a vacation or a new purchase like a sofa, ask yourself if you could wait and save some money first.
If you borrow money, always consider how you will pay it back. Look at the monthly repayment and add it to your budget.
Make sure you’re happy with the total interest you’ll pay once the debt is paid off.
The cheapest way to borrow money will depend on your particular situation.
For example, how much you need and for how long. Your credit rating will also affect your chances of being accepted and the interest rate you will get.
With a good score, you can get better interest rates and borrow more money, but if you had bad credit, you might find yourself unable to borrow money.
The cheapest way to borrow money short term is to ask friends and family if they can lend you money.
If you can do this, then you should agree how much you will borrow and when you can pay it back.
Below we look at some options for borrowing cheaply.
First, you need to check if you owe money or if you can apply for a free grant.
Check your benefits
At least seven million people are losing more than £15billion in unclaimed benefits, according to charity Turn2us.
The average amount people claim per year is £5,320, according to the anti-poverty charity – meaning you could be missing out on thousands of pounds.
Almost a million families are missing out on £2.9bn of Universal Credit, while 745,000 are missing out on £3.3bn in untapped Housing Benefit claims.
To check if you are eligible for benefits, you can use Turn2Us’ new online benefit calculatorwhich will take you 10 minutes.
You will need bank statements and information about your housing costs at hand to use the tool.
Social assistance allowances
Families in need can apply for free money and grants for furniture, bills and food of up to £1,000 under the welfare scheme.
You can apply for these grants through your local council – and they are available for low-income people who have experienced financial hardship or those who have faced a crisis.
You can get up to £1,000 in some areas – but some councils don’t even have a scheme for families to apply for.
Household Support Fund Grants
If you don’t have enough money to pay for essential household items, you might want to check with your local council.
How much you can get is determined on a case-by-case basis – meaning your local council will decide how much to give you.
Universal Credit emergency loan or advance
If you have Universal Credit, you may be able to get a budget advance to help pay for emergency costs such as a new stove or travel to work.
This is a loan, so you will pay it back through your universal credit payments. Your payments will decrease as you repay.
The smallest amount you can borrow is £100 and the maximum is £348 if you are single, £464 if you are in a relationship and £812 if you have children.
Cheap credit card
First you need to think about the usefulness of the card. If it’s a purchase, you should look for a 0% credit card.
If you want to pay off debt, a 0% balance transfer card will be the best solution, although you will have to pay a fee to transfer your money to the card.
You will have a set amount of time to pay off the debt. For example, the longest balance transfer is currently 34 months.
Only those with the highest scores will get the best cards and rates. Use an eligibility checker to find out which cards you’re likely to be accepted for, without leaving a trace on your credit report.
Cheap personal loans
Personal loans are generally best for larger purchases or if you need to consolidate debt and pay it off.
If you have a good credit score, you’ll get a better rate and pay less interest.
You agree to repay the amount over a fixed period of time in fixed monthly installments.
Use a comparison site like MoneySupermarket or GoCompare to compare rates.
Use a eligibility checker like MoneySavingExpert to find out what loans you could be accepted for, without hurting your credit score.
Credit unions are grassroots organizations where members pool their savings to lend to each other.
This often allows them to offer low cost products and it is hoped that the sector can provide an alternative source of funding to high cost banks and payday lenders.
They can offer a range of savings accounts, checking accounts and loans to their members. You have the flexibility to save as much as you want, when you want.
You usually have to pay a fee to sign up, but they offer competitive pricing.
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