BORROWING money is always risky business, but there are more ways to get interest-free credit than you might think.
Here are seven potential options if you're looking to borrow without paying any interest.
With the recent rise in interest rates, borrowing in the form of credit cards, loans, mortgages and overdrafts is set to become more expensive.
Interest can quickly rack up on debt, especially if you're only making minimum repayments, making it harder to clear the money you owe.
Finding an interest-free way of borrowing can serious lighten the financial load – here are some options worth considering.
The easiest and most efficient way to borrow money is an interest-free overdraft as it means you can borrow without doing almost anything.
Current accounts with these useful additions are available at all the major banks.
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For example, First Direct offers a £250 interest-free buffer on all standard current accounts, while TSB provides £100 as standard to Spend & Save Plus account holders.
Depending on your credit rating, your overdraft can be much larger though.
However, overdrafts have ceilings – and you could face hefty charges if you spend above your limit.
Make sure you're overdraft is authorised, too.
That just means it's confirmed and approved by your bank.
Many accounts have unauthorised overdrafts – which means you can technically spend more than you've got and then face costly charges.
If you open a new bank account, be sure to check upfront whether there's an overdraft and if it charges interest.
You can phone your bank to check what the overdraft is on your existing account to make sure too.
Many high street shops and online retailers now offer interest-free financing if you pay off your purchase in time.
For example, Currys offers six months interest-free credit on purchases over £99 – subject to terms and conditions.
Amazon also provides interest-free credit to buyers of certain products like electronics.
It's a risky move though and could encourage you to spend money you don't have, so be very careful when considering these plans.
You need to be sure you can afford the repayments or the interest can be incredibly high after the deal period.
These arrangements are slightly different to buy now pay later schemes as they're offered by shops themselves, so there's usually no middle man.
Buy now pay later financing
This increasingly popular way of borrowing involves the same principle described above, but on a wider range of products and retailers and on slightly different terms.
Instead of the seller lending you the item till you've paid it off, an independent buy now pay later (BNPL) finance firm such as Klarna or Clearpay will secure your purchase.
That means you owe the money to the finance firm NOT the retailer, who passes on your debt to this middle man company.
These lenders have made it possible to take out credit on vast swathes of high street goods – although critics have warned it's a slippery slope to unfettered spending.
Repayments are usually weekly or fortnightly so make sure you can afford the plan you agree to – miss an instalment and you'll likely face hefty penalty fees and could get a mark on your credit record.
The sector is still unregulated and in some cases not subject to vital consumer protections, according to MoneySavingExpert, so tread carefully.
You should also be aware that by using BNPL, you'll lose your Section 75 consumer protection, which means you can't use chargeback if there's a problem with your purchase.
0% credit cards
These credit cards offer a period during which zero interest rate is charged on new purchases.
That sounds easy enough – but key point with a 0% spending credit card is how long the interest-free window is.
They tend to offer much longer repayment periods than interest-free overdrafts, for example, which typically expect you to clear your debts within a year.
Barclaycard offers a 24-month 0% credit card, while Sainsbury's Bank will give you 23 months to pay off your debts.
However, you need to apply for these like any other credit card so you do need to pass a credit check.
And if you fail to make your minimum monthly payments or fall outside the credit limit, your coveted 0% rate could be taken away.
Money Saving Expert has a useful guide to the best ones on the market, too.
Payment services like PayPal now offer members and non-members interest-free credit on their spending.
In the case of PayPal, purchases over £99 are subject to four months' interest-free credit.
PayPal also offers a popular Pay in 3 scheme, allowing you to break your bigger purchases into more manageable chunks.
But like every borrowing solution, you must remember the risks.
After four months, the interest rate rises to 21.9% pa.
And you do need to apply, so there's no guarantee you'll get the rate you hoped for.
0% balance transfer credit cards
If you've decided it's time to pay off your overdraft or credit card debt, these can be a handy way to do so cheaply.
Balance transfer credit cards let you move debts from one account to another – and a 0% card has no interest for set period.
That could help stop your debts ballooning if they're in an account with a costly interest rate.
And if there's a set period attached to the 0% interest rate, that should incentivise you to start paying off your debt swiftly.
On the flip side, you do usually have to pay a charge to move the debt across.
For example, if you found a balance transfer card with a typical 3% fee, it would cost £30 to move £1,000 of debt.
Your credit score will also affect the terms, meaning you could be given a short set period of 0%, which doesn't provide much breathing space.
0% money transfer credit cards
Like balance transfer credit cards, these interest-free offerings involve moving your debt from one account to another, potentially cheaper, one.
But money transfer credit cards move your debts from a credit card to a bank account, rather than to a new credit card.
That means the eligibility criteria can be less stringent, because you're not being given a new credit card.
Having your debts in your bank account can also be an advantage if you want to keep things simple and have your money in one place.
Seeing your in-goings and outgoings on one statement could be a real help in paying off your debts.
But money transfer credit cards often carry higher fees than balance transfer cards, so keep an eye out for the small print.
Other tips to keep in mind
You don't need a shiny credit score to take advantage of some low-interest and interest-free borrowing options.
But if you have a poor credit score, it's less likely you'll get the best terms available.
Lenders only have to give the advertised rate to 51% of borrowers, so many people end up paying more than they expect to.
And as always with credit, don't overspend just because you can.
It's all too easy to fall into a debt trap and rack up hundreds, or thousands, in interest charges.
We've looked at ways to better use your credit card – and potentially save thousands.
And here are some red flags that credit advisers keep in mind when you're considering an application.
So one of these options could be right for you – but don't bite off more than you can chew.
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