I need to borrow some money
Thinking about borrowing money for the first time? This borrowing advice for young people should help you steer clear of getting into bad debt.
Do you REALLY need to borrow money?
We’re not asking to be boring grown-ups, but it’s vital to weigh up how important this money is, compared to the stress of going into the red.
Good reasons to borrow money:
- Because whatever you’re purchasing – a car so you can get to work, an education – it will have a long term positive effect on your life (shiny new devices don’t count).
- Because you can afford to pay it back quickly
- Because you’ve budgeted and had a good think about whether you can afford the monthly payments.
Bad reasons to borrow money *waggy finger*:
- Because you really really want that new pair of shoes/holiday/phone, even though you can’t afford it.
- Because you need to use credit to pay for vital supplies like food, heating, etc. This is a sign you either need to change your priorities or seek debt help.
So having weighed things up, you want to borrow some cash – where’s the best place to go?
Safest: The bank of mum and dad
Asking your parents for financial help is usually the safest and best place to start. They made you with their loins – therefore they’re less likely to offer you massive interest rates or get out a cattle prod if you miss a repayment. Asking them for help doesn’t mean you’ve failed as a grown-up, in fact you’re just making an adult decision about the best place to borrow money. Sit them down, explain why you need the money, and ask if they’re capable of helping. Of course, this only works if you have some kind of vaguely-functioning relationship with your folks.
To this end, have a good chat with them about their expectations – when do they want the money back? Can you get it to them on time? They may not charge you actual interest, but the emotional cost of a family feud over money can get pretty high.
Next safest: Use an ‘agreed overdraft’
An overdraft is something your bank can bung onto your current account that allows you to ‘dip’ into money you don’t have. They can be cheap, short-term ways of covering unexpected costs as long as you get them approved by the bank first (called an ‘agreed overdraft).
Warning – if you go into the red and you’ve not OK’d it with Mr Bank Manager, you could get hundreds of pounds worth of fees a month. If you’ve got a legit overdraft, then it’s quite a cheap way of borrowing a bit of an extra funds. Read more about overdrafts here.
Other ways to borrow money
There are other ways to borrow cash, and they all come with their positives and negatives. Read our types of credit article to work out which option is best for you. If you’re considering getting a payday loan, we proper recommend you read our article about them here, as the huge interest rates these companies charge can set you off on a debt spiral terrifyingly fast.
And while we’re all here, our top three tips for money-borrowing satisfaction:
Go for low to no interest, if you can possibly help it. Be wary of deals screaming ‘0% interest’ though – once the deal ends you could get stung with a big interest hike.
Make sure you can pay it back in time. Missed payments mean more interest, late fees, angry letters and a whole world of pain.
Work out how much the loan will cost you overall, once you count the interest. You can never just borrow £100 (unless you have very generous parents/mates). You always need to factor in the interest on the loan, and work out if you can afford that extra amount.
- The Money Advice Service offers free, unbiased and independent advice about all financial matters. 0800 138 7777
- StepChange offers free advice on your debt problems, basing it round what's right for you. 0800 138 1111
- Chat about this subject on our Discussion Boards.
- Need help but confused where to go locally? Download our StepFinder iPhone app to find local support services quickly.
Updated on 29-Sep-2015
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