Need to borrow (not a huge amount of) money, need advice.

[katkouta]

I have been checking about whether a loan or credit card is better. I need to borrow £900 and to pay it back over 2 or 3 years. Please can someone in the know advise me? I have been looking on Martyn lewis website as well as moneysupermarket but its all a bit of a blur!!

It comes down to the interest rate you'll pay and the total cost of the loan. A £900 loan taken out over 2 years with an interest rate of 6% means you'll pay about £40/month and the total loan will cost you £957. A credit card will charge you 15%+ interest which means the same amount of money over 2 years will cost you £1047+ to pay back at the rate of £44+/month.

A disadvantage of credit cards is that you may be tempted to just pay the minimum or even use the card to buy other things. That can quickly start to cost a lot and it risks never being paid off. I would suggest shopping around for the best value loan using moneysupermarket.com or similar.

Thanks Cogito, where did you get that info or is it just an example? The loans I had a quick look at were paying back much more excess than that. eg. £900 over 2 years was £55 pm, the extra was £440! Does it depend on your financial situation?

If you can be disciplined about it you might do well playing the 0% credit card game. MSE will have details of the best cards, but many are offering 12 months interest free again. Set up a standing order to pay a set amount a month and then cut up the card. When the time comes to transfer you may have to pay a small fee, but it will only be on the amount remaining rather than the whole £900 so should work out cheaper for you, if of course your credit history is good enough to get one of the cards.

There's some good infohere

Thans fishfairy, I was thinking of that, I am very disciplined. If I apply for many loans or cards it will affect my credit rating and make it harder for me though right?

As I understand it an application leaves a "footprint" but doesn't affect your score. So if you apply for lots at once some lenders may get nervous that you're taking on lots of debt at once and therefore may be likely to default. I think you probably don't have to worry about applying for a credit card and then 11 months later applying for another one.

I wouldnt take rejections as absolute though. I was once rejected for a card I wanted to do a balance transfer onto and called to ask why as I had never missed a payment/gone over limit or anything and the person I spoke to agreed that they were being silly rejecting me and approved my application.

The This Is Money: Loan Interest Calculator is the source of the information. I used £900, 2 year payback and 6% interest (theoretical loan) and 15% interest (theoretical credit card)

You can use the calculator to see that if you were told £55/month for 2 years the APR you were being asked to pay was 40%.... I'd suggest that's a rip-off.

I have applied for a card so will wait for results. I don't think they will give me all the money I need so I may have to apply for another...thanks