If you are to borrow money - borrow intelligently!

If you have to borrow money, it's important you do so as cheaply as possible.

 

Borrowing money is not a situation you ever want to find yourself in.
Sadly, sometimes it is unavoidable. If you find yourself in this situation, it's essential you minimise the cost of repaying the debt.
Here, we take a look at the various borrowing options available, using the sum of £5,000 as an example to illustrate the additional costs involved.
The cost of borrowing £5,000
The obvious place to start when borrowing a sum like this is a credit card. Your first option is to go for a 0% new purchases card.
So you could get one of these cards, buy an item that’s worth £5,000 with your new card, and then you won’t have to pay any interest on the resulting debt for up to 16 months.
Here are the cards offering the longest interest-free periods on purchases:

Card	0% period (for purchases)	Notes
Tesco Clubcard Credit Card for Purchases	16 months	Can also earn Clubcard points on all your spending
M&S Credit Card	15 months	Earn M&S points every time you shop with your card
Halifax All in One MasterCard	15 months	Also offers 15-month 0% period for balance transfers
Natwest YourPoints World MasterCard	15 months	Earn points that can be spent at retailers including Amazon and M&S
Barclaycard 14/14 Platinum Visa	14 months

Just remember that the 0% period begins when you take out the card, not when you make the purchase.
Alternatively, you can spend the money on your existing card and then transfer it over to a balance transfer card offering an extensive interest-free period. The good news is that the leading balance transfer cards have even longer 0% periods than the new purchases cards. However, you will have to pay a fee to transfer the balance over.
Here are the five cards offering the longest interest-free periods on balance transfers:

Card	0% period (for balance transfers)	Balance transfer fee
Barclaycard 25 Mth Platinum Visa	25 months	2.9%
Halifax BT 25 Month MasterCard	25 months	3%
Natwest Platinum MasterCard	24 months	2.9%
Barclaycard 24 Mth Platinum Visa	24 months	2.8%
Tesco Clubcard Credit Card for Balance Transfers	23 months	2.9%

The problem with 0% cards is that 0% periods eventually end. And if you haven’t fully paid off your debt by then, you’ll be clobbered by a chunky interest rate – perhaps as much as 19%!
Of course, you could shop around for another 0% card at that point, but who knows what deals will be available – and who they will be available to – in a couple of years’ time?
Low interest
So you could instead go for a card that offers a low interest for life on both purchases and balance transfers. Granted, you’ll be paying interest from day one, but at least it’s a low consistent rate that won’t suddenly end.
Here are the best Low APR cards on the market today:

Card	APR (Representative)
Sainsbury’s Low Rate Credit Card	6.9%
Barclaycard Platinum Simplicity	7.9%
Natwest Low Rate Credit Card Visa	9.9%

Personal loans
Another option is to go for a personal loan. The best interest rates tend to be for loans around the £10,000 mark, but you could still get good rates for a £5,000 loan, and the good news is that there is a price war currently going on in the personal loan market.
Here are the top rates for a £5,000 personal loan repaid over five years:

Loan	Representative APR
Derbyshire BS Personal Loan	6.4%
Hitachi Personal Finance Loans	6.8%
Sainsbury’s Bank Standard Nectar Cardholder Loan	7.0%
Clydesdale Bank Online Personal Loan	7.1%
M&S Personal Loan	7.1%
Santander Online Personal Loan	7.1%
Yorkshire Bank Online Personal Loan	7.1%

Social lending
Your final option is go down the social route and borrow via a social lending website. These sites basically cut out the banks, so you borrow directly from other people.
Potentially this can give you a better rate.
Right now you could borrow £5,000 at 6.7% via the Zopa website, which is pretty attractive. Just be aware that you’ll only be able to borrow via Zopa if you have an excellent credit rating. Indeed a weak credit rating could mean that any applications for a 0% credit card or even a personal loan will fail.
Sadly, the people who find it easiest to borrow are often the people who need a loan the least. Banks want to lend to people with sound finances, who may not need any extra cash.
The best way
For many people, the best way to borrow £5,000 will be via a 0% credit card because you won’t have to pay any interest at all.
But if you can’t borrow as much as £5,000 with a credit card, a personal loan might work better for you.
If you find you can’t borrow the money via any route, then you’ll either have to accept you can’t get the money or maybe get debt counselling if you motivation for borrowing is to pay off previous loans. You can get free advice from charities such as StepChange.
If you are able to borrow £5,000, well done! Just make sure that you make all your repayments on time, and maybe overpay if you can. That could save you interest in the long term.

 

The five best financial Spring Cleaners on the market

1. Best balance transfer card

0% balance transfer cards are fantastic tools if you’re carrying debt on a credit card.
Right now, the best balance transfer card is probably the Lloyds TSB Platinum MasterCard. If you transfer your credit card to this card, you won’t have to pay any interest for 21 months!. What’s more, the balance transfer fee is exceptionally low at 1.5%. (As long as you apply by March 23rd.)
Granted, there are several cards that offer longer 0% periods, but they all charge significantly higher balance transfer fees than the Lloyds card.
So, for example, the Barclaycard 25 Mth Platinum Visa card offers a 25-month 0% period, but you’ll to pay a 2.9% balance transfer fee when you make the transfer.
So if you had a £4000 debt, you’d have to pay a £60 fee to transfer the debt to the Lloyds card, whereas you’d have to pay a £116 fee to transfer the debt to the 25-month Barclaycard.

  
2. Best 0% purchases card
The Tesco Clubcard Credit Card for Balance Transfers is our favourite 0% new purchases card.
So if you got one of these cards and then made a big purchase, you wouldn’t have to pay any interest on the resulting debt for 16 months. What’s more, you can also earn Clubcard points on all your spending with the card. You’ll get five points for every £4 spent at Tesco, and 1 point for every £4 spent elsewhere.
There is one card available with a slightly longer 0% period – the Halifax Purchase Credit Card MasterCard which comes with a 17-month interest-free period for purchases.
In our opinion, the Tesco card beats the Halifax card because the Clubcard points offer is so attractive.
Just remember that the 0% period for new purchases always starts when you take out the card, not when you make the purchase.

3. Best savings option

Getting a decent return on your savings is getting harder and harder, so your best bet may well be to lend out your savings via a peer-to-peer savings site. These sites enable you to lend to other businesses or individuals and you can get a higher return than anything offered by the vast majority of savings accounts.
Right now, we think the RateSetter.com 3 Year Income option is especially attractive. You’ll get a fixed return of 4.4% a year, and you’ll also get protection from Ratesetter’s ‘Provision Fund.’ This means that if you lend to someone who is unable to repay his loan, you’ll probably be able to get compensation from the Provision Fund.
You should note that if there are a large number of claims against the fund, then there might not be enough money left in the fund to compensate your loss. What’s more, Ratesetter isn’t protected by the government’s FSCS scheme.
However, there have been no problems with Ratesetter so far, and plenty of savers are getting a great return from lending via the site.

4. Best mortgage

With interest rates so low, you can get some fantastic mortgage deals at the moment. Chelsea Building Society’s 2-year fixed deal is arguably the best. For the first two years you have the mortgage, you’ll only have to pay 1.74% in annual interest. That’s an astonishingly low rate. However, the fee is on the high side at £1825, and you won’t be able to borrow more than 60% of the value of the property.
If you don’t have such a large deposit – or ‘equity’ in your home – Nottingham Building Society has a great deal. Once again, it’s a 2-year fixed mortgage and the interest rate is 2.79%. Crucially you can borrow up to 80% of the value of the property.