Types of Borrowing

There’s an abundance of lenders and products available and it’s important to choose wisely, with an appreciation of the immediate and longer-term implications.  The wrong choice could prove unnecessarily costly, so read the earlier sections to help clarify your needs and understand the issues involved:

Before You Borrow…
Things to Consider
The Total Cost of Borrowing

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This article provides a summary of the common types of borrowing, outlining interest rates (APR), repayment methods plus general pros and cons. For more information, see the separate sections on each type.  Bear in mind this gives a general overview only and you need to do your own research and get independent, professional advice for your particular situation.

Research various borrowing options:

  • Compare APR, overall cost and the repayment plans of relevant products, to see what best suits your needs and budget.
  • Find out about each element of different packages and make sure you understand the terms and conditions, before you sign up for any deal.
  • For small-scale short term borrowing, consider an overdraft or credit, whereas a personal loan may be a cheaper option for larger amounts over a longer period.


Overview of Borrowing Options


Student Loan

Relatively cheap borrowing with delayed repayments & write-off period

Student Loan

Find out more: Student Loan


Personal Loan

Borrow a fixed sum & pay it back with interest, over a fixed length of time

Personal Loan

Find out more: Personal Loan



Bank authorises you to take out more money than you have in your account, up to an agreed limit or time period – acts like a safety net


Find out more: Overdraft



Purchase now & pay later


Find out more: Credit


Payday Loan

Loan to tide you over to your next payday: only small amounts (e.g. £1000 maximum) for very short periods

Payday Loan

Find out more: Payday Loan


Credit Unions

Credit Unions provide competitive loans and other financial services for their members; they may also provide a solution for people struggling with debt, or who are unable to borrow from the usual institutions.

Find out more: Credit Unions


Find out more:

For more details about each type of borrowing see the separate sections:

Student Loans
How to repay & whether to clear your debt early if you have spare cash

Personal Loans
Including Professional & Career Development Loans (PCDLs) & Graduate Loans

Tips for managing your overdraft

Credit cards, store cards & how to manage credit

Payday Loans
Good-to-know info about payday loans

Credit Unions
How they work & where to find a union you could join


How to Determine the Best Borrowing Option – Money Advice Service


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