MILLIONS of households struggling to pay the bills might consider resorting to debt to cover the cost of the essentials.
Taking on debt should always be a last resort – but sometimes there are no other options.
If you do need to take out a loan though, it is important to find the cheapest rate, so you don't end up racking up big interest charges that can add to your financial pressures.
Always make sure you read the terms and conditions, and understand the full amount you'll repay over the term of the loan – as well as any potential penalty charges or late fees.
As the Bank of England raises the base rate of interest, it has a knock-on effect on borrowing – and interest rates on loans, mortgages, credit cards and overdrafts have all started to increase.
But for those who are in financial difficulty, there are way to get cheap or even interest-free loans.
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The frozen foods specialist will start by offering £100 interest-free credit to members of its Food Club.
If you do borrow cash, be sure to factor in how you're going to repay it.
Peter Tutton, head of policy at StepChange said: “Even interest-free credit can lead to financial difficulty, and at a time when energy bills are set to rocket even higher, and inflation is at record levels.
"Companies providing credit for people to buy essentials need to consider the affordability of loans very carefully and consider how they will support customers who struggle with repayments.
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But there are alternative avenues you can explore if you need to borrow more.
We take a look at some of the other options:
A free overdraft with your bank account can provide a handy buffer for unexpected outgoings.
But not all banks offer them. In fact, this week Barclays revealed it would be scrapping its arranged overdrafts for many customers.
Overdrafts can have incredibly high interest charges, so it's important to check before you go overdrawn.
According to MoneySavingExpert, Nationwide offers an interest free overdraft up to £1,500 for its FlexDirect customers. But it's only 0% for a year, after which you'll be charged 39.9%.
Meanwhile, the First Direct 1st Account offers an interest-free overdraft of £250. If you go over this limit though, you'll pay 39.9% interest on any amount above £250.
Credit from retailers
Some stores will let you spread the cost of your payment, particularly on bigger purchases.
Common examples that spring to mind for in-store interest-free credit include furniture such as sofa or electricals and appliances such as a new TV.
For example, sofa company SCS lets customer spread the cost of their purchases, and offers 0% interest on orders over £320.
Applying for this type of finance involves a credit check, so if you're refused it will be noted on your file for other lenders to see, and could impact your score.
Obviously, this type of credit is only useful if you're making a specific purchase too – there's no point buying a sofa just because you can get an interest-free payment plan for it.
Buy now pay later
Buy now pay later (BNPL) is an increasingly popular payment option – it lets you spread the amount you owe into small chunks.
It's not a loan, but if you do need to make a purchase but can't afford it immediately, it's a way of delaying the point of payment.
BNPL is interest-free and fee-free – but some providers will have late payment charges if you miss an instalment.
Typically payments are made weekly or fortnightly over a short period.
For example, Klarna lets you pay in three instalments over 60 days, with the first chunk taken at the time of purchase. Alternatively, you can pay nothing at purchase, but need to pay the full amount within 30 days.
With BNPL, money is taken automatically from your card or account, so you need to make sure you have enough to cover it.
Most BNPL firms will do a credit check to decide how much to you can borrow. They are also now starting to report to credit agencies, so missed payments may affect your score.
Be sure to check the terms and conditions, as all BNPL providers work slightly differently, and late fees and charges will vary.
Interest-free credit cards
Some credit cards charge no interest for a set period.
You need to at least make the minimum monthly repayments though, or the 0% rate could be pulled – always check the T&Cs.
Be careful not to go over your limit either.
If you get a 0% balance transfer card, you can move across debt from other credit cards. This can be a great way to clearing debt, as any money you repay goes towards paying off your balance rather than on interest charges.
Before applying for any credit card, use an eligibility calculator to see how likely it is that you'll be accepted.
Lenders only have to offer the advertised rate to 51% of applicants, so even if a rate of 0% is being touted, you may be offered a higher rate.
Currently, Barclaycard has a credit card that offers 0% for 25 months, while M&S and Nectar have cards which charge no interest for 24 months.
Universal Credit emergency loan
If you're on Universal Credit, then you may be able to get an emergency loan.
This is known as a Budgeting Advance and is available to help you cover unexpected costs like if your boiler breaks or your car needs repairs.
You can borrow between £100 and £348 if you're single, up to £464 if you're in a couple, and up to £812 if you have children.
This money does have to be repaid through your Universal Credit payments though – so you'll find your benefit will be reduced while you repay the money.
A credit union is usually set up by a not-for-profit organisation, and can offer cheaper loans to those who need them.
With a credit union, members can pool their savings and lend the cash to others.
That means the saver gets a return on their money in the form of the interest you pay on the loan, and the borrower benefits from a cheaper rate than they might be able to get through a traditional lender.
You don't necessarily need to be a member to get a loan though – but this will vary, and you may have to pay a fee to join.
Be sure to check around though – don't just assume it's cheaper than a standard credit card or loan. The way interest is applied can be different than with other borrowing, so be sure to do your sums.
You can find your nearest credit union through the Association of British Credit Unions Limited website.
Where to get debt help
If you are struggling financially or in debt, it's important to get help.
Don't take money from loan sharks, and try not to resort to very expensive debt such as doorstep lending.
Friends and family may be able to help you, but it can be difficult to talk about money with those who are close to you.
If you in arrears with any payments, it's vital you speak to the company – it should help you work out a manageable payment plan to get back on track.
You might be able to apply for Breathing Space, a scheme which pauses interest charges for a certain period and stops you being hassled for payment.
A number of organisations can also offer advice and support – and we've previously looked at all the places you can get debt help for free.
These include Citizens Advice, StepChange and National Debtline.
A benefits calculator can help you work if you might be entitled to extra cash.
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A number of energy firms also offer hardship grants to people who are in arrears with their bills.
You should also check whether you're eligible for grants or extra help, such as from the Household Support Fund from your local council.
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