The best way to borrow a small amount of money

There’s always something that crops up isn’t there – something unforeseen that usually demands money to sort it out – whether it’s a part your car needs, or replacing that ancient boiler or washing machine. And when cash isn’t all that ready – what are the options?


I need a small loan – what are my options?

First of all – what exactly is a ‘small loan’? It’s tricky – like most things, it’s relative and what you might consider a small amount of money might be a fortune to someone else. Most personal unsecured loans start at £1,000 but typically, the smaller loans come with higher annual percentage rates (APR) which is the total amount of interest (plus fees) you’ll pay on top of your loan amount.

But if you don’t fancy paying interest worth nearly a third of your actual loan amount then there are sensible alternatives. Consider a credit card with a 0% interest period on purchases. Paying it off within the 0% timeframe means you’re only paying back what you’ve borrowed and miss out on hefty interest charges altogether (as long as you keep up the minimum monthly payments as well.)

Some current accounts offer overdraft facilities with better (or zero) interest rates, so if you only need a very small amount of money then this could be an alternative. If you don’t have an overdraft facility then speak to your bank, it’s usually fairly hassle free to arrange one and it could give you instant access to a bit more cash to keep things ticking over.

Any alternatives?

You can of course dust off that cap and take it in hand to friends and family, but let’s face it, it’s awkward and more than likely you’ll get a lecture about ‘how to budget’ . Or there’s the back of the sofa – but it’s unlikely you’ll glean enough to make it worth your while. If you’ve got time, sell some unwanted items – you know the saying – one man’s trash is another man’s treasure. You’d be surprised at how much you could make at a decent car boot or online auction sites.

A very modern alternative which is on the rise, are peer to peer lending sites such as Zopa .com which links up people who want to borrow money with those who are willing to lend it. It’s an alternative to banks so the rate of interest is usually slightly better.

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Borrowing money – Things to Consider

Bigger loans tend to attract the better APRs in general. Of course the downsides of taking out a bigger loan is that you’ll either need to pay back much more each month or your loan period will be a lot longer. Either way, you’re tied down to a big financial commitment.

Credit cards and overdrafts offer manageable and quick access routes to extra cash – especially if you only need a few hundred pounds or even less. If you’ve already got a credit card, then you can always look for better alternative – such as one that charges you zero for balance transfers and an interest free period on new purchases.

Size doesn’t matter when it comes to loans, whether it’s for £1,000, £3,000 or something in between you need to make sure you meet your repayments. Just one missed payment can blemish your credit report forevermore and you could struggle to borrow in the future so choose wisely and always make sure you

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