Andrew Hagger, money expert from Moneycomms.co.uk shares his tips on how to borrow wisely:
1. Be prepared
This means doing your sums to work out what you can comfortably afford to pay back each month, so take a look at your monthly budget and be sure not to overstretch yourself.
2. Work out how much you want to borrow and how long for
You can borrow from £1,000 to £25,000 for between 1 and 7 years. Typically the lowest rates are for borrowing £7,500-plus. Once you've submitted your loan application and assuming it's agreed the money should be in your account within 3-5 working days, so factor that in when collecting, say, a new car.
3. Shop around for the best rate
Take a look at what’s on offer on a comparison site such as Moneysupermarket or Moneynet and find a deal that works for you. Don’t limit your search to your current bank, and be sure to try the new peer-to-peer loan providers such as RateSetter or Zopa where the rates are very competitive especially for sums of £3,000 or less.
4. Consider low-rate credit cards
It’s also worth considering the low rate credit card from MBNA. It’s not a loan in the truest sense, but it enables you to transfer money from your card to your bank account without paying a fee, so it gives you the flexibility of where you spend your money. With an interest rate of 6.6% APR it’s certainly worth a look if you are looking to clear that expensive overdraft once and for all.
5. Guarantor loans
If you get turned down by your bank because of your credit record, there are other options. With a guarantor loan from the likes of Amigo Loans you can borrow between £500 and £5,000 at a representative APR of 49.9%. You will need to find a creditworthy friend or relative to act as guarantor for your loan, but every monthly repayment is another step towards a more healthy credit score.