Affordable credit or borrowing

A recent comparison of the cost of borrowing to buy a £500 TV shows just how much people can save if they buy wisely…

If the TV was bought through a loan from a credit union, it would have been paid off in 60 weeks at a weekly rate of £9.52 – a total cost of just over £570.

If the same TV been bought at a high-interest, high-street store, it would take three years and cost £1,524.12 repaying the same weekly amount. That means that it was almost three times the cost. This would increase further using more expensive means of borrowing.

At some point in your life you will probably need to borrow money. This may be for any number of reasons and can include personal loans, mortgages, credit cards or purchasing household items/clothes/electrical goods on credit.  You will require to pay back the money borrowed including the interest rate which is set by the APR (annual percentage rate). Borrowing money is used by many and is not an issue if you can afford the repayments BUT otherwise you could be taken to court and might even lose your home or other valuable possessions. Problems incur if you can’t afford to pay it back and incur additional charges or have to pay a very high rate of interest on top of the amount you borrowed

Before considering taking out a loan, you should check whether there are any benefits which you may be entitled to (which may increase your weekly income) or consider whether you are eligible for a crisis or community grant through the Scottish Welfare Fund.

If you still intend to borrow money, ask yourself the following questions:

  • Can you afford the repayments?
  • What is the annual percentage rate (APR)?
  • What are the repayments you are agreeing to and for how long?
  • Is this the right loan for me?

Loan Options

The various loan options which may be open to you to borrow money and you are encouraged you to use affordable credit sources rather than expensive lenders. Further information on borrowing is available from Citizen’s Advice, but briefly:

  1. Affordable Credit: These include banks, building societies and credit unions who can offer affordable personal loans with repayments that suit your individual finances. Information on local credit unions, and money management advice is through Find your credit union. Your employer may also be able to direct you to a credit union who provide services to their employees (e.g. SCOTWEST for employees of Argyll and Bute Council). Check with your employer.
  2. Expensive Credit: Pay day loans may seem like a quick fix solution, especially if you have been turned down for a loan or credit, but they are a very expensive way to borrow money. Some pay day lenders charge an excessive interest rate.  Illegal money lenders or Loan Sharks operate outside of the law, taking advantage of people who need cash quickly. They often charge very high interest rates and sometimes use threats and violence to frighten people who can’t pay back their loan. They may resort to bullying and threatening tactics to try to recover the debt. Please do not be tempted to use a loan shark even if you think you can’t borrow money because you have a poor credit history, are struggling with your finances or your income is low.  

If you need to borrow money, please borrow safely and sensibly and ensure that it is AFFORDABLE TO YOU! Please be certain that you are able to afford the repayments, including the interest rates before you borrow money, it's important to make sure you will be able to keep up the repayments, otherwise you could be taken to court and might even lose your home or other valuable possessions.