How to borrow at no cost (0% interest) and maximize your protection

Buy now, pay later: easy, no interest, but only for 3 months and no protection

Buy Now, Pay Later (BNPL) does exactly what it says on the tin. Usually you get it at the checkout when you buy something, leading you to buy the item now and spread the cost over a few weeks or months. Our new Should I buy now, pay later? guide walks you through.

✔️ Advantages: without interest | Easy to get | Refunds are fixed

❌ Cons: Many borrow when they don’t need it | It is (currently) unregulated – no recourse to ombudsman if things go wrong | No Section 75 Protection on Purchases | Short term only

The biggest problem with BNPL is that people get it when they don’t need it. They try to entice people into paying online as “an easy way to spread the costs,” but if you don’t originally plan on borrowing for what you’re buying, don’t.

However, if you do need borrow short term on items you need up to a few hundred pounds, provided you can afford to repay it, it’s easy and interest-free. There is no first choice here as it relates to your purchases.

The only major concern is if things go wrong – hitting your credit report, no items delivery and more. There is little recourse, as it is not yet covered by the financial mediator. Also, the rules in section 75 don’t apply, so it’s best to avoid it for anything larger.

0% credit card loans: good for small but complex amounts

If you want a cash loan (say, buy something you can’t pay with a credit card) then for less than £ 3000 a 0% money transfer credit card might be a good idea. way to get a lot more. cheaper than traditional loans.

Here, for a one-time fee of 3-4% of the transferred amount, you transfer money from the card to your bank account and then owe the card company instead.

✔️ Advantages: interest-free for a decent time | Can verify eligibility without applying | Regulated – so can go to ombudsman if there are problems

❌ Disadvantages: one-off costs | No protection under Article 75 | Easy excessive spending and borrowing | Refunds are not fixed, so it’s easy to underpay | Not everyone can have one

As with 0% charge cards, money transfer cards are best for those who trust themselves to only use them for a one-time purchase and to erase the card before the 0% ends. These cards are complicated, so please read our guide to 0% money transfers to make sure you get it right.

Best Deals Right Now: What really matters is what you’ll be accepted for, so ALWAYS check the 0% money transfers you’re most likely to get first. The current top pick is MBNA up to 18 months 0% (2.99% fee) *, although some poorer credit assessors may get a 3.49% fee. After the end of 0%, it is 22.9% rep APR (examples APR).

Once you have a card, complete the transfer as soon as possible. Then make sure you pay it back within the 0% period – the best way is to set up a direct debit repayment for a fixed amount, much like you have a loan, to make sure you clear it (and never miss a payment).

Overdrafts, student loans, mortgages, payday loans, car financing and other loans …

If you’re looking for new borrowing, we’ve gone over the top options worth taking out, but they’re not the only ones that are borrowing fish in the sea of ​​debt. And there are specific loans that can be better (or worse) in some cases. So let’s briefly review these …

  • Overdrafts are a new risk of debt (reduce yours to 0% and get paid £ 100). Overdrafts are a costly form of debt for the most part, now have an average APR of 40% and are best avoided. If you are already overdrawn an option worth considering is to switch to First Direct as it has an overdraft of £ 250 at 0% for the most part and pays you £ 100 which will help you with it. adjust more. More help reducing your overdraft fees.
  • Mortgages are a whole different category. If you are considering buying a new home or getting a new mortgage on your current home, that’s another story and it’s too much to put here. There is plenty of help in our Saving Mortgage Money section.
  • Is your car a wreck and you need it to get to work? The cheapest way to borrow to buy a new car is usually with a cheap personal loan. However, specialized auto finance packages can be more flexible. Our auto financing guides have all the pros and cons of each.
  • Student financing works more like a tax than a loan. A lot of people get what are called loans to go to college, whether it’s for tuition, the cost of living, or both. Yet in practice, what you pay back (if any) and interest depends on what you earn afterwards, so it’s kind of like a tax – the more you earn, the more you pay. Find out how they really work in Mythbusting on Student Loans.
  • And finally … don’t touch expensive payday loans or credit with a bargepole. It’s a financial and interest nightmare. If you have one, check out our payday loan help guide. If you had one before, you may also be able to recover from poorly sold payday loans.

In debt crisis? Don’t Borrow – Get Free Debt Help

The above options relate to new planned loans. Yet some are trying to borrow to get out of debt. It doesn’t work, so don’t try. Martin has three questions worth asking about your debts …

– Do you have trouble meeting the minimum monthly payments?
– Does your total debt (excluding mortgage and student loan) exceed one year’s salary?
– Do you have sleepless nights or depression / anxiety related to debt?

If you said yes to any of these questions, don’t borrow more – instead, get free, one-on-one debt counseling help from Citizens Advice, StepChange, or National Debtline. And if you need emotional support, try CAP.

They are there to help, not to judge. The most common thing we hear after is, “I finally got a good night’s sleep.” Read inspiring stories in our Wannabe Debt Free forum and check out our mental health, debt, and debt crisis help guides.

This article first appeared in the MSE weekly email on Wednesday April 28.

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