Debts to avoid
An interest-free loan from your family is the cheapest form of borrowing and payday loans are the most expensive. As a general rule you should avoid, or repay, debt as fast as possible, starting with the most expensive debt first.
Below is a simplified list of borrowing types in broad order of interest costs, with most expensive first. Typical annual interest rates* are shown in brackets:
Pay day loans/doorstep lending (400 – 2,000 per cent)
Pawnbrokers (130 – 500 per cent)
Storecard (20- 35 per cent)
Credit card (8-55 per cent)
Secured personal loan (6-23 per cent)
Unsecured personal loan (5-15 per cent)
Residential mortgage – 95 per cent of property value (6 per cent)
Residential mortgage – 85 per cent of property value (5 per cent)
Residential mortgage 70 per cent of property value (3 per cent)
Student loan – pre 2012 graduates (1.5 per cent)
Borrowing from family (nil to 4 per cent)
All in all avoid debt where possible or ask family

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