Best ways to borrow from £1 to £25,000

If you’re looking to borrow some cash, now is certainly a great time to do so. Interest rates are at record low levels and there are some fantastic deals on credit cards, personal loans and mortgages.

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But the best place to go for your loan will depend on how much money you require. Here, we round up your options for different borrowing amounts.

Borrowing: Up to £2,500

If you’re looking to borrow a fairly small sum of money, a good place to start is an overdraft. However, you will need to choose carefully as many overdrafts come with hefty interest charges attached.

If you only require a little cash to occasionally see you through from one month to the next, the First Direct 1st Account offers a £250 fee-free overdraft – anythin g over this is charged at a rate of 15.9% EAR. Switching to this account will also see you rewarded with £100 cash, though you will need to pay in £1,000 a month to qualify.

Should you need to borrow more than £250, however, the Nationwide FlexDirect Current Account offers an interest-free overdraft for 12 months. There is no set limit on the size of your overdraft, but it will be subject to approval.

Be warned though that once those 12 months are up you’ll be charged 50p per day for as long as you use your overdraft, so it’s best to pay back what you’ve borrowed before you get to that point.

Read more about the best banks to be overdrawn at, in Mark Hooson’s article.

Borrowing: Up to £7,500

Those looking to borrow a larger sum of money, perhaps to buy a new car, should consider a credit card. Competition in this market has been going from strength to strength and you can now avoid paying interest on your spending for a year and a half.

Both the Santander Credit Card for Purchases and the Tesco Clubcard Credit Card for Purchases are currently offering new customers 18 months at 0% on all spending. Both cards come with a representative annual percentage rate (APR) of 18.9% (variable) when the 0% deal is up.

But bear in mind that you’ll only be accepted for these credit cards if you have a good credit rating. Your credit rating will also determine how much you can borrow, so it’s worth ensuring it’s up to scratch before you apply for a card. You can apply for a copy of your credit record through our credit monitoring channel and follow these tips for improving it.

Borrowing: Between £7,500 and £15,000

Should you need to borrow between £7,500 and £15,000 – perhaps to fund those all-important home improvements – a credit card could still be your weapon of choice.  However, you may find your card provider refuses you to give you a credit limit large enough – in which case, a personal loan (or unsecured loan) is another competitive option.

Personal loan rates have fallen considerably in recent months and the Sainsbury’s Bank Standard Loan now offers a representative APR of 4.6% on loans of between £7,500 and £15,000, providing you repay the loan within three years. If you need longer to repay your loan, Derbyshire Building Society and Yorkshire and Clydesdale Banks offer the same 4.6% rate on the same borrowing, for up to five years.

Peer-to-peer lenders are another option worth considering. They offer competitive loan rates by allowing you to side-step the high street banks and borrow direct from consumers. If you were to borrow £7,500 to £15,000 over one to five years with Zopa, for example, you could pay an APR of a little as 4.5%.

Bear in mind that, once again, you will need a good credit rating to qualify for the above rates. But if your credit rating isn’t up to scratch, don’t despair because it could be worth visiting your local credit union for a loan.

Credit unions are not-for-profit financial cooperatives that are owned and controlled by their members. They offer loans, savings accounts and current accounts, and although their rates won’t be as competitive as those found on the high street, they can help those on low incomes or who have a less-than-perfect credit score.

For example, if you borrowed £10,000 over three years with Manchester credit union, you would pay an APR of 8.5% and your monthly repayments would be £314.30.

Borrowing: Up to £25,000

Personal loans are available up to £25,000 so if you are looking for larger borrowing, they are still an option worth considering. But the attached interest rates will be higher than they are for medium sized borrowing.

If you’re an existing First Direct 1st Account customer, for example, you can get your hands on a rate of 5.1% with the bank for loans of between £15,001 and £25,000, repaid over one to seven years.

And Clydesdale and Yorkshire Banks offer an APR of 5.8% on loans of the same size repaid over the same timeframe.

Borrowing: £25,000 and beyond

If you’re looking to borrow more than £25,000, you may want to think about applying for a secured loan. However, this is a decision that shouldn’t be taken lightly. You can only apply for a secured loan if you own a property as the loan will be secured against your home. And this means if you fail to keep up with your repayments you could lose the roof over your head.

There are benefits to applying for a secured loan though, namely that they can prove easier to qualify for than an unsecured loan. Secured loans can be repaid over a longer timeframe too. For example, if you apply exclusively through MoneySuperMarket, you can borrow £30,000 over 15 years with Fluent Money and pay an APR of 6.7%. Your monthly repayments would be £261.38.

You can find out more about secured loans here.

Of course, you might also be looking to borrow more than £25,000 because you’re buying a house – in which case, the good news is mortgage rates are still at record low levels across all deposit sizes.

For example, if you only have a deposit of 10%, the Post Office’s two-year fixed rate mortgage is priced at 3.48%, reverting to 4.49% after two years. It has a fee of £1,495 and the overall cost for comparison is 4.5% APR.

If you have a larger deposit of 25%, the Post Office also offers a two-year fix at 1.88%, reverting to 4.49% after two years. It has a fee of £1,495 and the overall cost for comparison is 4.2% APR.

For a smaller fee option, the West Brom offers a two-year fix at 1.89%, reverting to 3.99% after two years. It has a booking fee of £99 and a completion fee of £900. The overall cost for comparison is 3.7% APR.

You can compare a wide range of mortgages by simply using our comparison tool.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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