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Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 12/01/2022

The average cost of a small loan has fallen sharply from this time last year, but a 0% credit card could still be the cheapest way to borrow £3,000 or less, new research shows. has found that the average interest rate on a £3,000 loan taken out over three years is 14.3%, down from 15.4% this time last year. That’s the average though, and this rate would still cost you £661.90 in interest over the whole term of the loan. The cheapest unsecured personal loan currently is from Metro Bank, charging an APR of 4.9% with no fee. You would pay total interest of £226.68 over the term of this loan. But you could slash borrowing costs even further by using a credit card offering an interest-free deal.

The best interest-free credit card deals

In fact, using a fee-free 0% APR credit card could save you more than £600 in interest charges on the average unsecured loan, costing less than £100. You could even pay nothing at all if you are approved for the top deals: if you move an existing balance to the longest no-fee 0% balance transfer card from Sainsbury’s Bank, you could get 0% APR for 21 months with no fee, meaning repaying a £3,000 balance wouldn’t cost you anything in interest as long as you repay at least £150 a month to clear the full amount within the 21 months, and make all your payments on time.

The longest 0% balance transfer card which does charge a fee is from Virgin Money, giving you 0% APR over 35 months, with a fee of 2.94%, which works out at £88.20 in total interest on a £3,000 balance.

The longest 0% money transfer card (a type of card which can pay cash straight in to your bank account) is from MBNA, charging 0% APR over 18 months with a 2.99% fee. It would cost you £89.70 in total interest to borrow £3,000 on this card.

If you wanted to use a credit card to spend £3,000 upfront, you could choose a card offering 0% on purchases, such as Barclaycard’s 0% deal over 24 months with no fee. You wouldn’t pay interest as long as you repaid more than the minimum each month and cleared the balance within the two-year term.

Interest-free deals get longer

Borrowers are benefiting from better introductory offers on credit cards across the marketplace, with providers offering longer and longer interest-free periods for balance transfers and purchases. Since January 2021, the longest balance transfer term has risen from 29 to 35 months, and from 20 to 24 months for introductory purchase, giving you longer to repay without worrying about interest. As an added bonus, both of these deals come with no monthly card fee.

“Borrowers choosing a fee-free card instead of a loan could avoid paying any interest if they set aside £150 per month in repayments,” said Rachel Springall, finance expert at “However, if they don’t pay their debt back before their interest-free offer expires, they will incur interest charges, which can typically be higher than on a loan.

“The best choice between a credit card or loan will entirely depend on how strict a borrower can be with their repayment plan, but what is certain is how important it is for borrowers to compare deals carefully. If borrowers are struggling with their debts, then seeking help from a debt charity is wise and it’s always worth checking any credit score before applying for a card or loan too, for example with Experian.”


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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