Seven ways to borrow money without paying any interest

Borrowing money is always a risky business, but there are more ways to get interest-free credit than you might think.

Here are seven potential options if you’re looking to borrow without paying any interest.

You don't need a perfect credit score to get an interest-free loan - but there are risks


You don’t need a perfect credit score to get an interest-free loan – but there are risks

With the recent increase in interest rate, loans in the form of credit cards, loans, mortgages and overdrafts are set to become more expensive.

Interest rates can quickly add up on debt, especially if you only pay the minimum, making it even more difficult to pay the amount you owe.

Debt should never be your first choice – you’re better off saving for anything you want to buy.

Borrowing should always be a last resort and is usually only used in an emergency.

If you find yourself in need of credit, finding an interest-free option can make your repayments less stressful – here are some potential options.

Overdraft without interest

An interest-free overdraft can be a simple way to borrow because it’s linked to your bank account.

Current accounts with these helpful additions are available at all major banks.

For example, First Direct offers a £250 interest-free buffer on all standard checking accounts, while TSB offers £100 as standard for Spend & Save Plus account holders.

How much is available to you will depend on your credit rating.

Crucially, overdrafts have a ceiling – and you could face hefty fees if you spend over your limit.

Make sure your overdraft is also authorized, which means the overdraft has been confirmed and approved by your bank.

Many accounts have unauthorized overdrafts, which often come with punitive fees.

If you’re opening a new bank account, be sure to check first to see if there’s an overdraft and if it’s interest-bearing.

You can phone your bank to check if the overdraft is in your current account just to be sure.

Retail Credit

Many high street stores and online retailers now offer interest-free financing if you pay for your purchases on time.

For example, Currys offers six months interest-free credit on purchases over £99 – subject to terms and conditions.

Amazon also offers zero-interest credit to buyers of certain products such as electronics.

However, it’s a risky move and may encourage you to spend money you don’t have, so use extreme caution when considering these plans.

You need to make sure that you can afford to repay the loan or else the interest can be very high after the transaction period.

These arrangements are a bit different buy now pay later as they are provided by the stores themselves, so there is usually no middleman.

But since it’s still a credit application, it will show up on your credit file and may affect your score.

Buy now pay later

This increasingly popular way of borrowing involves the same principle described above, but across a wider range of products and retailers and on slightly different terms.

Instead of a seller lending you the item until you pay it off, an independent buy-in finance company (BNPL) like Klarna or Clearpay will insure your purchase.

That means you owe it to the finance company NOT the retailer, who passes your debt on to this intermediary.

This means you need to know your loan terms as they can vary significantly.

Crucially, lenders will only do a “soft” credit check on you, which means they don’t know how much you’ve borrowed elsewhere.

As a result, critics have warned that BNPL slippery slope to uncontrolled spending.

Repayments are usually weekly or biweekly, so make sure you can afford the plan you agree to and be extremely diligent about paying off your debt.

If you miss an installment and you could end up facing hefty penalty fees and possibly being marked on your credit record – in some cases, your debt could be refunded. transferred to a debt collector.

The industry remains unregulated and in some cases not subject to significant consumer protection measures, according to the report. MoneySavingExpert, so go carefully.

You should also know that by using the BNPL, you lose your Section 75 consumer protection rights, which means you can’t use a chargeback if there’s a problem with your purchase.

0% credit card

These credit cards offer a period during which zero interest is charged on new purchases.

That sounds easy — but the bottom line with a 0% spending credit card is how long the interest-free period is.

For example, they tend to offer much longer repayment terms than interest-free overdrafts, which typically require you to clear your debt within a year.

Barclaycard offers a 0% credit card for 24 months, while Sainsbury’s Bank will give you 23 months to pay off your debt.

However, you need to apply for these like any other credit card so you need to pass a credit check.

And if you fail to make your minimum monthly payments or exceed your credit limit, your desired 0% interest rate could be forfeited.

Money saving expert has a Guide to the best ones on the market, too.

Credit Union

Credit unions can be an important lifesaver for people struggling with their finances.

They are usually locally based nonprofits where members pool their savings to lend to each other.

This means interest rates are often lower than on standard loans or credit cards.

You’ll have to check the requirements of your nearest credit union – some of which require you to have saved money with them before you can get a loan.

Moneyfacts has a Guide for credit unions.

Family and Friends

Loved ones can get you out of a predicament without any effort.

While it can be difficult to admit to friends or family that you need help financially, they may be willing to assist if they can.

However, if you are borrowing from anyone you know, it is extremely important to have a conversation about the terms first.

Ask how long they’re willing to lend you cash and if they expect more in return.

We recently talked to a mother who became homeless after she borrowed money from a friend, who became a loan shark.

Remember: friends and family should not seek to profit from you.

Other tips to keep in mind

You don’t need a stellar credit score to take advantage of some of the low- and no-interest loan options.

But if you have a bad credit score, then less likely you will get the best terms available.

Lenders only have to offer the advertised rate to 51% of borrowers, so many end up paying more than they expected.

And as always with credit, don’t overspend just because you can.

It’s all too easy to fall into the debt trap and pay hundreds, or thousands, of interest.

We’ve looked at ways to Use your credit card better – and potentially saving thousands.

And here are some red flags that credit advisors note when you are reviewing an application.

So one of these options might work for you – but don’t bite into more than you can chew.

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