All of us get into a financial pinch sometimes. You might be facing a similar situation after a car has broken down, you’ve got an unforeseen domestic emergency like a broken boiler or you might simply have had a large number of unexpected expenses leaving you struggling to make it through to the next pay day.
Whatever the reason, being short of cash is no joke and can make you anxious and irritable. Thankfully, there are plenty of ways to borrow relatively small amounts of money at short notice even if you have had credit problems in the past.
A host of lenders now offer small loans to people, even to those who have made financial mistakes in the past. Most of these loans are unsecured, meaning that you won’t have to put up a property as security, and are available for any amount between £250 and £500.
The downside to these personal small loans is that most of them come with high-interest rates meaning that you could end up repaying the same amount again in interest.
Payday loans are also for relatively small sums – anything between £50 and £1,000 – and can be taken out and repaid in a few weeks when you get your next salary payment. The interest rates are high, though, with some loan companies charging you as much as £40 for every £100 that you borrow. That means that the headline APRs can look extremely high at first glance but it should be remembered that, as the loan is usually only for a month or two, the annual rate is pretty meaningless.
Payday loans are a reasonable and safe choice if you are confident that you will be able to repay it in full plus the interest when it is due.
Using your credit card
If you need money really quickly and have a credit card, then you can use this to borrow the cash at no interest for up to 30 days. This depends on you being able to repay that amount in full when your next repayment is due. If you do this, then the card issuer will not charge you any interest on the amount that you borrowed.
Remember, however, that this won’t apply if you take the money out as a cash advance. In these cases, you will be charged an administration fee and, in some cases, interest on the cash advance. A few card issuers are now allowing you to transfer money from your credit limit into your bank account without incurring interest.
An overdraft with the bank
Overdrafts are fine so long as you agree to them in advance with your bank. If you don’t, then you’ll face a high-interest rate and extra admin charges for what is known as an ‘unplanned overdraft’. Sometimes, these fees can be as much as 15% APR and you’ll run the risk of breaching your account’s terms and conditions if you don’t bring it back into line within a reasonable time scale.
Agreed overdrafts can be arranged over the phone or online with your bank within seconds. Some accounts allow you to go overdrawn up to a certain amount without prior arrangement but most of these come with a monthly fee and some may charge you per transaction once you are overdrawn.
If you are struggling to secure credit elsewhere, you might be able to use the good record of somebody else to get a loan. Guarantor loans work because a third party – a family member, friend or somebody you work with – agrees to cover the repayments should you be unable to. They are available for smaller amounts and may charge lower interest rates than a small unsecured loan.
If you live in an area with a credit union, you may be able to borrow a small loan from one of these community-based financial organisations. These types of loan generally come with reasonable interest rates and long repayment schedules if necessary. However, one of the downsides is that you won’t be able to borrow unless you are already a saver with a credit union in many cases.
A small loan from a doorstep lender gives you rapid access to money and can be useful if you urgently need cash. Beware, though, the interest rates can be very high with this type of lending.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley