- Don't borrow if you don't have to. Buying on credit can add substantially to the cost of your purchase. You should also think twice before borrowing if you would still be repaying the loan long after your prospective purchase has stopped being of any use to you - if you want to finance a holiday, for example, or buy something that will quickly go out of fashion.
- Don't overstretch your budget. Although it is best to pay off a loan as quickly as possible to keep interest charges to a minimum, the most important thing is to estimate how much you can realistically afford to repay each month.
- Check your credit card limit. Provided you have sufficient availability - or you can persuade your card issuer to increase your limit - using a credit card to borrow can be cheaper and more flexible than taking out a personal loan. Of course this is true only if you have a card with a low rate of interest and you are disciplined enough to make regular monthly repayments to clear the debt.
- Avoid borrowing on impulse. Some retailers use credit promotions to encourage impulse buying. This usually takes the form of some kind of discount if you use their store card (which works like a credit card) or apply for the store's fixed-rate loan (which works like a personal loan). Either way, the interest on the credit is often staggeringly expensive.
- Beware interest-free credit deals. Although some genuinely are free, others offer interest-free credit for a limited time only - six months, say - and charge a high rate of interest after that. Buy-now-pay-later deals can also end up being expensive. With these, you pay nothing for a few months and then either settle the debt in full or start to make monthly repayments that tend to carry a high rate of interest.
- Do your homework. It's easy to think that the best place to get a loan is from your bank but this is rarely true, especially of high street banks. You can keep your borrowing costs to a minimum by checking the 'best-buy' tables published in the personal finance pages of the weekend press or by using one of several Web sites that provide information on the various loan deals available.
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