How to Borrow Money with an Interest-Free Loan

By Asa Ghaffar

 Most people need to borrow money at some point in their life. Payday loans and pawnbroker loans both charge a high APR of upwards of 1000%; this can serve to exacerbate a personal debt problem. It is possible to borrow money and even get an interest-free loan in the form of a bank overdraft or family loan. Others choose to perform a credit card balance transfer and benefit from up to 12 months of interest-free credit.

The Benefits of an Interest-Free Loan

A £2,000 Halifax personal loan currently charges a high APR of 18.9%. The monthly repayment over 12 months is £188.23 and the customer is charged £258.76 in interest. An interest-free loan over 12 months results in a monthly repayment of just £166.67. Bad credit Payday loans and pawnbroker loans charge as much as £20 per month in interest alone on every £100 borrowed.

Interest-Free Bank Overdrafts

Many banks offer customers an interest-free overdraft because they want their custom. The Alliance and Leicester are currently offering customers interest-free overdrafts of up to £2,000 for no monthly fee. Halifax currently offers student interest-free bank overdrafts of up to £3,000. Even those that don't need an interest-free loan should consider putting the proceeds into a savings account.

Borrow Money with a Family Loan

A family loan is an exceptional way to borrow money for those with bad credit. Most family members will offer an interest-free loan with no penalty for missed or late payments. Contrast family loans with a Payday loan or pawnbroker loan where any penalties for late payment can be extremely steep.

Interest-Free Credit Card Balance Transfers

An interest-free credit card balance transfer is only suitable for those with a good credit rating. It involves applying for a new credit card that extends an interest-free period to new customers and then performing a transfer of the balance onto the new card. Virgin credit card currently offers new customers interest-free credit card balance transfers lasting up to 15 months.

Family loans, credit card balance transfers and interest-free bank overdrafts are an excellent way to borrow money and will considerably reduce the longevity of personal debt. Interest-free loans provide a vastly superior alternative to Payday loans and pawnbroker loans. Never borrow money frivolously as, interest-free or otherwise, it still has to be paid back to lenders.