Consumers should consider borrowing now in case lenders tighten application restrictions

While it is never advisable to take on debt to manage day-to-day costs, we are currently living through extraordinary times when having access to cheap credit might be a sensible back-up plan. Saying this, there are already signs that lenders will start making borrowing more expensive, as loan rates have started to increase, as well as the suggestion that lenders could start tightening their application processes. As such, consumers might want to consider acting now rather than leaving it for later to ensure they have access to cheap borrowing. Here we’ve taken a look at some of the most popular forms of borrowing and the cheapest options available.

For consumers who are unsure if they will need to borrow money to see them through the Covid-19 outbreak, a 0% purchase credit card could be the best option as it will provide them with the back-up of credit if needed without the commitment of borrowing money. At the moment, both Sainsbury’s Bank and Barclaycard are offering the longest interest-free term of 27 months on a 0% purchase credit card. Sainsbury’s Bank offers this term on its Dual Offer Credit Card Mastercard, which is available to those with a minimum income of £10,000. This card also comes with the benefit of enabling customers to earn Nectar points when they use the card. Barclaycard also offers a 0% interest period of 27 months on its Platinum All-Rounder Visa. This card is available to those who have a minimum income of £20,000.

For consumers who want to borrow a larger sum of money, an unsecured personal loan could be an option, however borrowers should keep in mind that with a loan they will have to make monthly repayments, so this option may not be the best choice for those whose job is at risk.

For those looking to take out a £2,000 personal loan, Metro Bank offers the lowest APR on a loan without opening restrictions. Metro Bank’s Personal Loan charges 7.9% APR for a repayment period of 24 months. The total amount repayable is £2,162.64.

Borrowers looking to take a £5,000 personal loan repayable over a 24-month period could consider Tesco Bank, which offers the lowest APR of 3.4%. Both its Telephone Personal Loan and Online Personal Loan offer this APR and the total amount repayable on these loans is £5,176.32.

In April, many banks and building societies will increase their overdraft rates, with the majority upping their arranged overdraft rates to 39.90%. While this will make overdraft borrowing more expensive for many consumers, overdrafts can still be a useful short-term, emergency borrowing option. Saying this, it is important to not depend on an overdraft for day-to-day living expenses as it can be an expensive form of long-term borrowing. A chart with all the new overdraft charges can be found in our previous story on the cost of new bank account overdraft charges .