Living is expensive and most of us couldn't get by without using credit for some of the big purchases in life including a home, a car, a new kitchen or even a holiday. In these situations, credit can be useful but, it must be managed carefully to avoid an accumulation of debt which you may find difficult to pay off.
The trick is to find the cheapest way of borrowing money, keeping repayments to a minimum and only borrowing the exact amount you need.
We've outlined some tips to finding the cheapest way of borrowing:
- Never be tempted to borrow more than you need, and always aim to pay the amount off as quickly as possible to avoid paying too much interest.
- Know your budget and only commit to monthly payments that you know you can afford. Remember, as well as repaying your debt you should also be putting money aside for any one-off or unforeseen expenses that may arise.
- Depending on the amount of money you need, it could be that a 0% credit card is actually the most effective method of borrowing. Just remember to plan for when the 0% interest rate ends.
- If you decide on a loan remember there are 2 types - secured and unsecured. When taking out a personal loan, an unsecured loan is usually the best option as your home or car is not secured against it.
- With any borrowing, make sure you know when repayments are due to avoid unnecessary charges and missed payments being recorded on your credit record. Set up a direct debit to avoid this.
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