A loan can solve an immediate shortage of money, but it creates a new repayment. Interest and charges can also make the original cost much higher.
Before applying, work out what the money is for. An emergency needs a different answer from a purchase that could wait. The options below may help you meet the cost without taking a commercial loan.
What do you need money for?
1. Ask whether the cost can wait
Start by separating a need from a preference.
A broken fridge may need to be dealt with quickly. A phone upgrade, holiday or home improvement may be easier to delay.
If the purchase can wait, divide the cost by the number of months you are willing to save. A £600 purchase saved over six months would require £100 each month.
If saving that amount is difficult, a loan repayment of a similar amount may also place pressure on your budget. This simple test can prevent you from agreeing to a commitment that does not fit your finances.
2. Speak to the company you need to pay
If the money is for an existing bill, contact the provider before looking for a loan.
Depending on the bill and your circumstances, it may be willing to:
- Move your payment date
- Divide the amount into smaller payments
- Give you more time
- Review an existing repayment plan
- Check whether you qualify for a reduced tariff or hardship fund
Explain what has changed and offer only an amount you can realistically maintain. Do not agree to a payment simply to end the conversation.
Rent, mortgage payments, Council Tax or Rates, energy bills and court fines can have serious consequences when unpaid. Use the MoneyHelper Bill Prioritiser if you are unsure which payment needs attention first.
3. Check benefits and other income
Millions of household circumstances are different, so it is worth checking rather than assuming you are not entitled to support.
The government lists free benefits calculators that can estimate:
- Benefits you may be able to claim
- How a change in work could affect your income
- Support linked to rent, children, disability or caring
- Council Tax Reduction where applicable
A calculator only provides an estimate. Your actual entitlement is decided when you make a claim.
You can also check whether your employer offers overtime, an earned wage scheme or a salary advance. A salary advance still reduces a future wage, so make sure the following month will remain manageable.
4. Look for grants and emergency support
A grant does not usually need to be repaid. Eligibility and available support depend on your location and circumstances.
A grant does not usually need to be repaid. A loan, including an interest free one, does. Check which you are being offered before you accept.
Support is not guaranteed. Apply as early as possible and provide accurate information about your circumstances.
5. Ask your energy supplier for help
If you cannot afford gas or electricity, contact your supplier before borrowing.
Suppliers may offer:
- An affordable payment arrangement
- A review of existing debt repayments
- More time to pay
- Access to a hardship fund
- Help with energy efficiency
Ofgem provides current information about help with energy bills.
6. Reduce the cost instead of financing it
If you need an item rather than cash, look for a cheaper way to meet the same need.
You could consider:
- Repairing an existing item
- Buying a tested refurbished replacement
- Using a local reuse charity
- Selling something you no longer need
- Asking whether your workplace supplies essential equipment
- Checking whether an insurance policy covers the cost
- Comparing the cash price with any payment plan
Be careful with instalment services. Spreading the price does not make an item cheaper, and missed payments may create further problems.
7. Do not borrow to cover ongoing debt problems
A new loan may postpone a problem without fixing it. This is particularly risky if you need credit for rent, energy, food or repayments on other borrowing.
If your normal income no longer covers essential spending, contact a free debt adviser. They can review your finances, identify priority bills and explain the options available where you live. Our guide to where to get free debt help lists the trusted services.
If you still decide to borrow
Sometimes the alternatives will not meet the full cost. If you still consider a loan:
- Borrow only what you need
- Check the total amount repayable
- Make sure repayments fit after essential spending
- Compare APR, fees and the repayment term
- Avoid making several applications in a short period
- Never borrow from an unlicensed lender
A longer term can reduce each payment but increase the total cost. Approval is never guaranteed, and a poor credit history may result in higher rates.
Read Understanding APR and the Total Cost of a Loan, Choosing the Right Repayment Term and How Much Can You Borrow With Bad Credit? before applying.
Frequently asked questions
It depends on the reason you need money. Waiting and saving may suit a planned purchase. A grant or local welfare scheme may be more suitable during an emergency. A payment arrangement may help with an existing bill.
Some councils provide grants, vouchers, essential items or other crisis support. The help and eligibility rules depend on where you live. Contact your council directly to check.
Using savings can avoid interest, but do not leave yourself unable to pay rent, food, energy or another essential cost. Consider how much emergency money you need to keep available.
No. An advance or Budgeting Advance normally has to be repaid through future Universal Credit payments. It may be interest free, but it will reduce the money you receive later.
It avoids a commercial lender, but it is still borrowing. Agree the amount, repayment dates and what will happen if your circumstances change. Put the agreement in writing to reduce misunderstandings.
Important information
LoansForBadCreditUK.co.uk is a credit broker, not a lender. We do not provide debt advice or guarantee that an application will be accepted.
Borrowing may not be suitable if you are struggling with existing repayments or essential household costs. Consider free support and other available options before applying for more credit.