Martin Lewis explains how to borrow money cheaply – before deals are done
Borrowing money and paying no interest could become trickier in the future, Lewis warned.
Speaking on the ITV Money Show tonight, Lewis said borrowing was “cheap” at the moment.
“Banks will even pay you Â£ 130 to get 0% discovered, “he said.” But with a hike in interest rates on the cards that may soon change. “
Lewis said the easiest way for most people to borrow was a 0% credit card.
These allow you to borrow and pay no interest for a certain number of months.
But if you’re using a credit card to borrow, only do it for a one-time planned purchase, Lewis warned, like a new refrigerator.
âDebt is like fire – it’s a useful tool but it can burn,â Lewis explained. âThe problems with credit cards are that it’s easy to overspend and the payments aren’t fixed. “
0% interest credit cards can provide up to 23 months of interest-free spending.
Tesco Bank operates for up to 23 months, while M&S Bank goes up to 22 months with Â£ 25 cash back and Sainsbury’s Bank has a 22 month limit.
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Lewis added that people borrowing on 0% credit cards should make sure they pay at least the monthly minimum and stay within the credit limit, otherwise they could lose the magic 0% rate.
Borrowers should also pay back whatever is owed to them within the 0% period, before the rate starts to climb.
Another way to borrow is to Buy now, pay later programs.
âIt’s become almost ubiquitous if you checkout online,â Lewis said. âIt’s not regulated, but it will be. “
These can be useful for planned and occasional short-term loans of up to Â£ 300, he said.
Provided you can repay it, they are easy and interest free.
However, failing to repay can affect your credit score and lead to fines, he warned.
Another option is 0% overdraft, and the best part is that some banks will actually pay you to have one.
But these can be a very risky way to borrow, Lewis said.
âWell done, they are very powerful, but poorly done, you will be wrong,â he explained.
Overdrafts can be “dangerous debt” and charge up to 40% interest. But two banks offer cash deals to switch to them, plus 0% overdrafts.
First Direct is offering Â£ 130, then most customers will be eligible for an overdraft loan of up to Â£ 250 at 0%, with 39.9% interest on top.
Nationwide has an overdraft agreement arranged at 0% interest, but only for one year. After this point, interest climbs to 39.9%.
The bank offers up to Â£ 2,750, but the amount you get depends on your credit score.