According to historical data from the Bank of England's Money and Credit reports, consumer credit net borrowing spikes significantly in late autumn, known as the November Spike. Net consumer borrowing through credit cards, car finance, and personal loans consistently experiences a sharp acceleration in November. This is primarily fuelled by aggressive retail promotions and early festive spending. However, we start to think about borrowing in the summer.
Most of us need to borrow money at some point in our lives. Using the right type of credit in the best way can help you deal with unexpected expenses, such as buying a new fridge, or planned expenses such as festive holidays. Find out what to consider first, to make sure you make the right decision.
Deciding whether to borrow money
There are some important questions you need to ask yourself before you borrow money. For example, can you wait until you have enough money without borrowing? And could you afford to pay it back if you did borrow the money?
If you’re struggling financially, first make sure you’re claiming all the benefits you’re entitled to and if there are grants or rebates you might qualify for. Also, see if there are other ways to cut back on your costs, for example by switching energy, phone, or internet provider.
If you tend to be impulsive when buying things, try giving yourself a cooling off period of at least two days. When you’ve had a chance to think about it, you might change your mind. If you’re facing higher living costs, find out about extra sources of income and support in our section Help with the cost of living. If you’re thinking about borrowing money to help pay your bills, you should consider getting free debt advice first. Find out more about Dealing with debt.
If you decide to borrow money
If you definitely want, or need to borrow money, there are some important factors to consider.
How much can you afford to repay?
It’s important to work out how much you can afford to repay each month, as this will affect which borrowing option is best for you.
Make sure you’re realistic about how much you could pay if, for example, your mortgage or rent went up, you had to spend more on things like energy bills, or your pay was cut.
Choosing the right type of credit
The right type of credit or loan for your situation could mean you pay far less overall. To help, our Your options for borrowing money tool will show you a range of credit options that could suit your needs. When you’ve worked out what type of credit suits you, shop around and compare deals. It’s important to look at:
- the interest rate and the annual percentage rate (APR)
- how much you’ll repay in total
- any penalties for missed or late payments, or fees if you pay it back early
- the cost per week or month, and whether this might vary.
Find out more about the costs of borrowing, including working out a repayment plan and deciding how much to borrow, in our section on Managing credit well.
Beware high-cost credit
If you have a poor credit score, you might be tempted to use a payday loan company. Before signing up for a payday loan or any other type of high-cost borrowing, make sure you’ve explored all possible alternatives.
Look out for loan sharks
Loan sharks often use online channels like social media to try and lend to people. This kind of lending is illegal, and it could cost you a lot more than you think. Find out more about loan sharks and how to spot them.
How to check your credit report for free
When deciding whether to give you credit, a bank or other organisations will often check your credit history by asking one or more credit reference agencies for information from your credit report. Checking your credit report is free and it’s good to do so regularly as it won’t affect your chances of getting credit. Our guide explains how to check and why it matters.
Energy Bills - Super Important Top Tip
You could be missing out on £150 off your energy bill - here's how to check
While the cost of heating your home might not be the only thing on your mind during this long hot summer, unfortunately prices are likely to rise again this winter. There is a critical date everyone needs to be aware of. Suppliers use customers' records as of Sunday 23 August to check who is eligible for the Warm Home Discount. Last year 438,000 households in the SW were eligible for WHD, with a rebate of about £35.4m off their bills. The government scheme knocks £150 off bills if you are on means-tested benefits such as universal credit.
To help those who might struggle to pay, energy companies distribute the £150 WHD in the winter. Households in receipt of Housing Benefit, income-related Employment and Support Allowance, Pension Credit and Universal Credit qualify. Households who are eligible should get the discount automatically, provided their supplier has over 1,000 customers.
The Really Important Bit
However, that only happens if your name is on the bill and you are receiving one of these benefits.
Someone might not be named on their electricity bill if they have recently moved house.
Eligible customers on pre-payment meters who use a key or card to top up will also need to ensure that their household's account is registered in their name.
So, please act now and check with your electricity provider that your name is on the bill.
www.moneyhelper.org.uk 0800 011 3797
Please note that this one phone number now connects you to all our money and pensions guidance specialists
To download the information sheet in full, use this link.