Cheapest ways to borrow money

If you’re looking to borrow funds, we reveal some of the best and cheapest ways to do so.

Warning: Late repayment can cause you serious money problems. For help, go to

Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.

Most of us will need to borrow money at some point in our lives. But the borrowing method you choose can have a big impact on the amount you pay overall and how long it takes you to repay it. That’s why it’s important to research your options carefully.

What to consider before borrowing money

Borrowing money is not a decision to be taken lightly. With interest rates on the rise, borrowing is rapidly becoming more expensive at a time when the cost of living is also soaring. So it’s important to keep the following points in mind:

  • Do you really need to borrow or could you use savings instead?
  • Do you know exactly how much you’ll be paying in interest and fees?
  • Can you afford the monthly repayments? Keep in mind that missed payments can have a negative impact on your credit report and lead to debt problems, so only ever borrow an amount you can afford to pay back.
  • Have you checked your credit rating? You can check yours for free with Finder. The better it is, the easier it will be to access the best interest rates.

Cheapest ways to borrow money short term

If you do need to borrow money, we’ve outlined some of the cheapest ways to do so over the short term. Borrowing over a shorter term means you’ll pay less in interest overall.

Credit cards

Credit cards can be a really easy and flexible way of borrowing money, as long as they are used sensibly. For example, you can use a 0% purchase credit card to spread the cost of an expensive purchase, such as a holiday or new car, interest-free over several months. Or you can use a 0% balance transfer credit card to help you pay off existing credit card debt more cheaply. Simply transfer over an existing card balance and you’ll avoid paying interest for a number of months. Keep in mind there will usually be a transfer fee of around 1% to 3% to pay.

Another option is a 0% money transfer credit card. This enables you to move funds from your credit card into your bank account and then use them however you like – whether that’s to pay for an expensive item or clear existing debt such as an overdraft. You then make payments to your credit card provider. Note that you’ll usually have to pay a transfer fee of around 4%.

Keep in mind that when using any type of 0% credit card, if you don’t pay off your balance in full before the 0% deal ends, interest will kick in – usually at a rate of between 20% and 25%.

The amount you can borrow with a credit card varies, with the average UK credit limit between £3,000 and £4,000. In some cases, if you have a good credit rating and a high income, you might be able to borrow as much as £10,000, but it’s vital that you would be able to keep up with your repayments if you have a credit limit this high.


  • Can borrow interest-free
  • Flexible monthly repayments
  • Convenient
  • Purchases of more than £100 and up to £30,000 are protected under Section 75 of the Consumer Credit Act


  • Interest rates can be high if you don’t clear your balance within the 0% period
  • Best deals are reserved for those with good credit scores
  • Charges will apply for late or missed payments
  • Repayments aren’t fixed so it’s easy to underpay

Personal or unsecured loans

A personal loan is more suitable for sums above £3,000. It allows you to borrow a lump sum which you repay over a set term (1 to 7 years) in fixed monthly payments. Although you’ll pay interest, rates can be competitive. For example:

  • If you need to borrow £1,000 to £25,000, rates are from 6.2% APR with loans from Santander.
  • If you need to borrow £1,000 to £35,000, rates are available from 6.9% APR at Virgin Money.
  • If you need to borrow £1,000 to £40,000, you can get rates from 6.1% APR from the Post Office.

You can use a personal loan to fund home improvements or a wedding, for example, or to consolidate existing debts into monthly payments with 1 provider.


  • Fixed monthly payments make it easier to budget
  • Can repay over a longer term
  • Higher borrowing limits than a credit card


  • Payments are not flexible so you must be able to meet them
  • Early repayment charges may apply
  • Interest will be charged

Buy now pay later

For smaller borrowing amounts, you could consider buy now pay later (BNPL). You will often be offered this when you go to pay for items online. There are a number of different buy now pay later providers and while they all work slightly differently, they all allow you to spread the cost of your payment over a few weeks or months. Before you sign up for a BNPL service, make sure you read the terms and conditions carefully and, as with any type of borrowing, only spend what you can afford to pay back.


  • Interest-free
  • Easy to get accepted
  • Fixed repayments


  • Can be easy to overspend
  • It’s currently unregulated (but that’s likely to change)
  • No Section 75 protection on purchases

Bank overdraft

Another option for borrowing money is to use an arranged overdraft on your current account (basic bank accounts don’t offer overdraft facilities). Your overdraft limit will depend on your credit score and income and can be from a couple of hundred pounds to a few thousand.

The downside is that interest charges tend to be high so it’s important to compare options carefully. The Nationwide FlexDirect account offers an interest-free arranged overdraft for the first 12 months. But after that the rate jumps to 39.9% APR.

Alternatively, the First Direct 1st Account offers a £250 interest-free overdraft and you’ll also get £175 for switching to the account, which could help you to clear some of your debt.


  • Flexible way to borrow
  • No monthly repayments


  • Can be an expensive way to borrow
  • Can be easy for debt to build up

Cheapest ways to borrow larger amounts over the long-term

If you’re looking to borrow a larger amount over a longer term, your best option is to use a secured loan. You can usually borrow funds of £25,000 or more over a term of up to 25 years.

Secured loans work in a similar way to unsecured loans as you can borrow a lump sum over a set term, and repayments are made on a monthly basis. The difference is that you’ll need to secure the loan against an asset, usually your home. Because of this security, you can usually borrow a much larger sum compared to a personal loan, and interest rates tend to be lower. However, should you be unable to keep up with your monthly repayments, your home could be at risk.


  • Fixed monthly repayments
  • You can borrow a larger sum of money
  • Monthly repayments are lower as you’re borrowing for longer


  • Your home is at risk if you don’t keep up with your repayments
  • Longer repayment terms means you’ll pay more in interest overall
  • Early repayment charges may apply

Where to get free debt help

If you find yourself struggling to repay debt, don’t bury your head in the sand. There are a number of national organisations you can approach for free, impartial help and advice. They can help you work out which debts you should prioritise and negotiate with creditors to arrange an alternative repayment plan.

Organisations to contact include:

  • Citizens Advice
  • StepChange
  • National Debtline
  • PayPlan
  • Debt Advice Foundation

Frequently asked questions

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