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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Representative example for a loan of £4,000 for 24 months at an interest rate of 15.5% APR fixed. In this example the total amount payable (including interest and fees) would be £4633.57 and your monthly repayments would be £193.07.

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giffgaff gameplan is a trading style of giffgaff Limited, we are a credit broker and not a lender and introduce loan applications to its selected provider of loans Retail Money Market Limited trading as Ratesetter. Terms and conditions apply. Finance subject to status. 18s and over. Credit is provided by Retail Money Market Limited trading as Ratesetter, 6th Floor, 55 Bishopsgate, London EC2N 3AS Ratesetter is authorised and regulated by the Financial Conduct Authority – Firm Reference Number 633741

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Posts on this site reflect the opinion of the members posting only, and not necessarily giffgaff’s opinions or views. There’s a lot of information here that can help you, however, you must remember that we operate an open forum and sometimes messages that are posted are misleading, deceptive, or inaccurate. If you follow these tips, you do so at your own risk. Always do your research and check the terms.