There's no need to pay hefty interest charges if you only need to borrow until the end of the month. We explain the cheapest way to get a short term loan.
Borrowing over a short period can often be quite expensive, especially as most lenders feel they will struggle to make a profit from lending money on a short term basis.
However, there are options that could allow you to borrow at little or even no cost.
1. Use a credit card
Using a credit card can be a great way to borrow interest free for a short period.
Most credit cards will give you somewhere between 45-59 days before they'll start applying interest. This means that if you are certain you’ll be able to repay the debt within this period, you’ll be able to borrow using your credit for no cost.
However, you’ll have to ensure that you clear the balance in full or you will end up paying the higher standard interest rate making a credit card a less attractive choice.
For this reason that it makes sense to use your cheapest credit card (the one that charges the lowest interest rate on purchases) providing it has a sufficient credit limit to fund your purchase.
If you need to borrow for several months then you should consider applying for a credit card offering an introductory 0% rate on purchases.
Alternatively, applying for a 0% balance transfer credit card and shifting the outstanding across would be another option to consider if you’re unable to clear your borrowing as soon as you’d hoped.
If you need to borrow cash then it’s worth checking whether your credit card offers a 0% deal on money transfers as this would enable to access the money you need for a minimal cost (read this article to find out more).
Money transfers aside, you should generally avoid withdrawing cash on your credit card as you’re likely to incur significant charges and pay an extortionate rate of interest from the moment your money comes out the ATM.
Take a look at our Action Plan: How to Get the Best Credit Card to find out how to pick the cheapest credit card for your circumstances, and use our credit card comparison to find the right card for you.
2. Ask friends & family
If you have a friend or relative that can lend you the money you need it's certainly worth considering as it's likely to be the cheapest option available to you.
To keep things straight forward it's a good idea to agree how much you're going to borrow, whether you'll pay any interest, and how you're going to repay them up front. If you set down your loan terms on paper and both keep a copy it'll help to solidify the arrangement so you both know where you stand.
Of course, if you're borrowing from a friend or relative you need to make sure you keep to the terms, otherwise your friendship, if not your credit standing, could be damaged.
You should both read our article: Lending to Friends: How to Make Sure You Get Your Money Back for more information.
3. Use an overdraft facility
An overdraft can be a flexible way to borrow money over a short period as it allows you to repay what you owe whenever you want to.
However, they can be like financial quick sand, and unless you're disciplined, once you go into your overdraft it can be difficult to pay back what you owe.
This isn’t helped by the high interest rates that many overdrafts apply as they tend to be far higher than standard credit card rates, adding to the cost of your purchase considerably.
To avoid getting caught out you need to ensure that you are fully aware how much you will be charged for using your overdraft, and make a plan to repay what you owe as soon as possible.
It’s also really important to check that your authorised overdraft credit limit is sufficient to cover the amount you need to borrow, otherwise you’ll be stung with nasty fees and could damage your credit rating.
If you don’t have a sufficient credit limit on the account you plan to pay from you could always consider using some of your overdraft, and paying some on card if you have one available.
Read our guide How to Pay Off Your Overdraft for more information and use our Action Plan: How to Get the Best Current Account for help finding the cheapest current account overdraft for your circumstances.
4. Get a social loan
In recent years, online social lending has expanded quickly and now represents a viable alternative to high street lenders.
One of the significant benefits of social lending loans is their flexibility, meaning you can usually repay them at any time at no extra charge.
Take a look at our guide Social Lending - Is It Worth the Risk? for more information on social lending and what you need to consider before you apply.
You can then use our Social Lending Sites comparison to find an option that suits.
5. Negotiate with lenders
If you need money to pay a bill or settle an invoice but simply don't have the cash available until you get paid it's worth being up front with the lender.
Explain that you don't have the money right now, but that you will have it shortly, and ask whether they're able to be flexible as to when you make your payment.
They may be willing to extend your payment deadline providing you guarantee you'll have the money available, and while you may incur some interest charges, it's likely to be cheaper and less damaging to your credit rating than defaulting completely.
Read our article What to Do If You Can't Pay a Bill for more information.
6.Consider a payday loan
If you have no choice then you could consider a payday loan. However, you need to be aware that this is likely to be an incredibly expensive way to borrow.
With interest rates up to 5,000%, if you go down this route you need to borrow as little as possible for as short a time as possible. Fail to do this and the amount you owe will grow exponentially.
Read our article Should I Ever Take Out a Payday Loan? for more information, and use our payday loans comparison to find the cheapest option if you decide this is something you want to do.
