It’s important to explore other ways of increasing your income or reducing your spending first before you consider borrowing money:
- Make sure you’re getting all the income you’re entitled to.
- Use an emergency fund if you have one (money you’ve saved for an emergency, for example in a savings account).
- Claim on insurance and pensions.
- Budget and make savings if possible.
Borrowing to deal with existing debts you can’t repay is rarely a good idea. Talk to a trained debt adviser first about options for dealing with your debts or credit commitments. You can speak to one by contacting StepChange Debt Charity.
If you do borrow money, it makes sense to choose the cheapest type of borrowing.
Whenever you borrow money, you should try to have a clear idea of how you’ll make the repayments. You could use our budget planner to help you do this.
- Check what other options you have before borrowing.
- If you do decide you need to borrow, look for cheap ways to do it.
- Try not to use store cards, pay-day loans, door-to-door lending and unauthorised overdrafts. The costs can be very high for these types of borrowing.
- Remember that if you don’t keep up payments on a secured loan, your home (or other goods such as a car) will be at risk.
- Avoid illegal lenders (loan sharks). They charge excessive fees and typically use aggressive tactics if you cannot repay the money. You can report illegal lenders to government Illegal Money Lending Teams on 0300 555 2222 (England), 0800 074 0878 (Scotland) or 0300 123 3311 (Wales). In Northern Ireland, call the Trading Standards consumer line on 0300 123 6262.
You can use this handy budgeting tool to plan for your debt repayments, bills and other expenses and work out how you can make your outgoings match your income.