How to find the right borrowing option
Published Tue, Sep 4, 2012 Updated Tue, Feb 16, 2021
If you are in need of credit, for whatever purpose, there are many options available to you. You can get yourself a credit card, take out a personal loan or extend the overdraft limit on your bank account.
Not all of these options are suitable for every person, and you need to find the one that is right for you. If you take out a loan or a credit card that isn’t suitable, you could end up in financial trouble, such as not being able to make repayments on a credit agreement.
So, how do you work out which borrowing option is best for you? Let’s start by looking at the different options that are available:
Personal loans are a type of unsecured loan, which means that they are not secured against your assets (i.e. a home or a business). Personal loans can be used for any purpose, but most people use them for big plans and purchases such as buying a new car or getting a new kitchen fitted.
Credit cards are also unsecured loans, but a person with a credit card will usually use it for smaller, short-term borrowing. Credit cards are a convenient way to manage your money and spending, provided you can afford to pay off the balance each month.
An overdraft is used to borrow money from your current account on a short-term basis, such as to tide you over when expenses are higher than usual.
Based on these descriptions, you should have a better idea of the borrowing option that is right for you. You may also want to speak to a financial expert or use an online loan calculator before choosing a borrowing option.