To take out a small loan when I never have before?

[Rizzo8]

Early 30s, good credit score and never used loan or overdraft.

The situation is I am leaving a toxic job after years there and have some weeks between the end of that role and my new job (which involves a £10k salary increase).

I didn't have to have a break between roles but I am mentally and emotionally exhausted and my body is crying out for a break. My home needs attention (a joiner to fix a few things), I have both parents significant birthdays days apart and a trip to visit an old friend I haven't seen since before covid.

I'm also finding food bills etc very expensive and am already looking at how to budget for a short period.

For a loan - I would only need around £500 although the general offering is from £1000.

I took out an overdraft with the bank 6 months ago which I have never used but thought I might have to. The reason I want a loan instead of overdraft is because I can't stand the anxiety of getting to 0 then dipping into it
.Seeing the loan and the money there would feel much better and mean I could actually relax and somewhat enjoy those weeks before new job.

For the record, my partner already gifted me £350 but it hardly made a dent

The alternative is sticking with what I've got but not enjoying my break because I'm counting the pennies day in day out

Could you just borrow the money from your parents and pay them back over 12 months?

Don't use your overdraft. They're expensive and have a detrimental affect on your credit rating.

If you're only talking about minor cashflow issues, you might be able to solve this by getting a credit card and using it for all your normal spending and pay it off in full every month without fail. So that delays the cost of groceries, fuel/travel and everything else you spend day today leaving your bank account by a few weeks. Or get a 0% spending card if you're concerned you need more time.

You could also switch your bank account for a free incentive - usually around £150-200.

Have you reviewed all your bills? Broadband, mobiles, subscriptions etc. If your broadband is more than £25 and your mobile is more than £10 a month, you can reduce these if you're not in a contract. Also see if you have any credit on your energy account that you can get back.

Afraid this is how I feel as well.

I also agree with @Persipan, it feels like you're contributing to a problem, rather than solving one.

Fucking hell, do NOT take a loan from here or ANYWHERE like this.

292% interest!

£250 becomes £411 paid back.

Please, OP - and anyone else reading - do not ever ever take a loan like this.

This, OP.

If you don’t have savings to cover a couple of weeks off, don’t take time off now. Get your feet in the door of the new job and take time off in a month or so. Nearly all companies will honour pre-booked holiday plans for new starters so if you tell your new job you have a booked holiday in July, say, you’ll have your 2 weeks to look forward to then and can save up a buffer.

Yes this is true.

Your credit score is improved if it shows you have a) taken out credit (overdraft/credit cards/loans/mortgages etc) & b) paid them back on time without missing payments.

I would use your overdraft personally, no paperwork or application and although zero percent credit card is cheaper it is a faff to pay for services/trades/bills etc and you'd have to juggle what things you spent on it to make sure you were using it correctly for your particular circumstances

Sorry a post above mine says overdrafts make your credit score worse - I'm not sure either way so do a bit of googling to check

OP, it's actually good for your credit score to occasionally borrow money and pay it back as it shows potential future lenders that you pay your bills.

For a short term loan like this, think you'd be best getting a 0% credit card and doing a bank transfer of cash into your account. You'll pay a handling fee of around 3% but then typically no interest on the balance for about 6 months. Just pay it off in full as soon as you get paid.

There is no shame or stigma in borrowing money, especially when you have a clear plan to pay it off. Go and enjoy your freedom from toxicity, do a few things to your house, celebrate some birthdays and have some much deserved fun! 😊

Do you live with your DP? if you do it seems odd to borrow from them and not just help tide things over

The 0% rate will most likely not apply if you use the credit card to withdraw cash. I found this out the hard way buying foreign currency once.

Hi OP,

I'm afraid you've had some bad advice on this thread. I would suggest posting on the Money Saving Expert forums instead because the people over there really know their stuff.

I would strongly advise against taking out a small loan of the type you are referring to. These are basically loans for people who live pay cheque to pay cheque and don't have a spare £1000 for emergencies. The interest rate on them is high and so no financially savvy person would take one out because unless you are really on the bones of your arse, there are better options. I don't know for sure but I suspect that having one of these loans on your credit record will make your credit score worse rather than better even if you pay everything off in good time.

If you can get a 0% interest credit card in time, do that and then make sure you pay off at least the minimum amount each month and put money aside in a savings account to make sure you can pay off the full balance at the end of the interest free period.

If you can't do that, I would probably dip into your overdraft in preference to taking out a loan.

Whether it's an overdraft showing a negative balance or a loan showing a positive balance in your account makes no difference: it is still money that you have borrowed and will have to pay back. What matters is the interest rate, the repayment terms and the impact on your credit score.

I would put off the joiner until you have the money to have the work done, which you currently don't.

Congratulations on the new job. Hopefully this is a temporary rough patch and your new salary will help you build more of a financial safety net.

Oh and to everyone who is taking out cash on a 0% credit card, CHECK THE SMALL PRINT! There may well be an exception and an extra punitive interest rate for using credit to buy cash.

I wouldn't like the idea of my daughter taking out a loan to pay for a present for me OP, I would much prefer a picnic in the park and a happy face than a gift any day. x

Martin Lewis' Credit Club is great for situations like this. You can view your credit report and it gives you ratings/suggestions for what you are likely to be accepted for and what is the best options available to your rating. I'd make that my starting point.

Also if you have a credit union in your region, they are good for small, short term loans such as this. They often have easier application processes, competitive rates and not nearly as cut-throat as high street banks or loan companies.

Thanks @MaryBethMayfair I know my local city does have a credit union so I'll check that out.

Appreciate the concern. I have a very small amount of savings I've just started a couple of months ago. I spent most of my savings on a property a few years ago. Part of my motivation re the new job is so can save more.

Also I know people are saying it's very easy to overspend but if I know I won't once I have set amount

Reviewing bills - yes I got a better mobile deal and tried to with broadband at the weekend - they gave me only a £12 reduction though I haggled hard. Still doesn't much touch the sides.

@aLFIESMA ah I know. Usually I wouldn't let it bother me but it's because they're significant birthdays

I'm going to make something for one parent but the other I will need to buy for

I actually applied for a 0% card with my bank and was rejected. Even though they suggested in the app I could be eligible and was also eligible for up to 8k loan based on my activity

I am looking at my local credit union but will need to become a member and take out a savings account

Do bear in mind that applying for credit can itself have a (temporary) impact on your credit rating, so factor that in as you consider what you'd like to do.