Top 3 means of borrowing

January is a tough month to juggle finances after the big splurge pre Christmas and then hitting the sales in the new year-it all tugs on our purse strings. Everyone needs a lending hand from time to time. The decision is which shape or form this should take-from a personal loan to an overdraft or possibly even extend credit on a credit card.

There are plenty of offers of credit out there from store cards to everything we see advertised in the junk mail we receive, but just how do we decipher the good from the bad?

The interest rate is crucial in helping you select a lender, but beware “typical” rates. These are solely for “typical” customers and depending how you fare in a firm’s ‘credit test’ you may pay a higher rate or be refused credit altogether.

Other points to be aware of are:

• any companies offering insurance. Make sure you know what EXACTLY what is covered and that it is worth any premium they have quoted you.
• stick rigidly to the terms agreed, for example if it is a balance transfer deal for 12months, then clear it within that time frame or everything resorts back to typical APRs which are very much higher.
• take advantage of store cards or reward cards offers to save money/get treats.

The following are the current three top deals for borrowing some extra money:

• Alliance & Leicester –  A&L’s current account offers an interest free overdraft of up to £2,500 for the first 12months.
• M&S Money are offering 0% off of purchases for the first 12months. Points are also earned when the card is used in store and over time these are converted into discount vouchers. Remember though to clear your debt within the 12months or you move onto a much higher interest rate.
• The Leeds Building Society offer a flexible loan allowing you to clear the debt early if it suits without incurring any penalties. The typical interest rate is a low 6.9%(depending on your credit rating). Taking the example of a £5,000 loan over a year, the monthly repayments would be £431.92 and the total credit cost would be £183.04. Taking the same loan amount of £5,000 and changing the repayment period to 3years, the monthly repayment would be £153.68 and the total interest cost would be £532.48.