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Borrowing money

A bank or building society lends money, either through an overdraft or by a loan.

Credit Cards

As mentioned in the section Plastic cards, credit cards are a very easy and convenient way of purchasing goods.

However, they can also be a very expensive way of borrowing money. If you do not have the money to pay off the credit card at the end of each month you will be charged a high rate of interest.

This is not the best way to borrow money and leads to many people in the UK getting into massive amounts of debt.


An overdraft is when you have less than zero in your account. In those circumstances you are in effect borrowing from the bank. The bank will charge you for this facility through fees and interest.

The most expensive overdraft is an unauthorised overdraft, one which you have run up without the agreement of your bank.You will pay heavy interest on the amount you are overdrawn, and charges on top. The bank may also refuse to pay for the cheques you write. That could cause you embarrassment, and again the bank will charge you.

If you need to go overdrawn, especially on a regular basis, arrange an authorised overdraft by going to see your bank. Costs of interest and fees can still mount up, but will be substantially less than having an unauthorised overdraft.


A loan is an arrangement for your bank to lend you a specific amount of money. This will be for a specified period, with an agreed rate of interest and time over which you have to repay the full amount. If you need to borrow, this is usually a much better way than running up a debt on your credit card. You will be much less likely to go into debt if you make sure you can afford the repayments before you agree to take out a loan.

This page was updated on 15 July, 2008


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