Borrowing money

You may have lots of extra expenses while your child’s on treatment. As a result, you may find consider borrowing money to help pay the bills or even day-to-day living costs. If so, it’s important to arm yourself with the facts first – no borrowing is risk-free, but some types are less risky than others. 

Types of loan

Loans normally come with a large amount of small print. When you haven't got the time to read it all, or you don't understand what it all means, you could end up paying high interest charges and owing more money.

There are safer forms of borrowing that you can apply for from the government if you receive a qualifying benefit. 

Secured loans

A secured loan is linked to a borrower’s property, so is only available to homeowners or mortgage holders. This means that you could risk losing your home if you don’t keep up the repayments. Despite this, they are commonly used for borrowing large amounts of money over a long period of time. This is because they are easier to obtain and bigger borrowing is possible.

Unsecured loans

Also known as personal loans, these are available to most people with a fair credit score. They offer better flexibility in choosing how long you need to make the repayments. However, interest rates tend to be higher because the lender relies on your promise to pay it back. If you want to repay the loan early you may have to pay a penalty.

Credit union loans

Credit unions are regulated community organisations run by and for their members. They aim to offer loans at low rates and to help members in need of financial advice or assistance. Many also have free life insurance. You will need to be a member and the terms of borrowing will depend on the credit union.

Find a credit union in your area on the Association of British Credit Unions website.


An overdraft will allow you to borrow money through your current account. Once you go into your overdraft you are effectively in debt, so they should only be used as a short-term solution. Authorised overdrafts can be arranged in advance and may vary from a daily, weekly or monthly fee, to an interest rate. Exceeding your agreed limit (an unauthorised overdraft) can be very costly and should be avoided. 

Buying on credit

There are various ways to buy on credit using credit cards, store cards, hire purchase or mail order catalogues. They’re good for financial wiggle room if you know you can pay off the purchase at a later date.

However, beware of spiralling into debt. If you don't pay your bill on time then you can be charged a late payment fee as well as interest on the whole amount. If you repeatedly pay your bill late then your credit card provider may increase your interest rate. This could also affect your credit score rating, making it difficult for you to borrow money in the future.

Credit sale agreements

This is where you buy goods at the cash price and pay it back over time. There are various types of credit agreements and they all come with different conditions. You may find some interest-free deals available, but this is normally as long as you make your payment on time.

Risky borrowing

If you are considering a loan make sure you do some homework first. All of the following loans involve risks that could ultimately be an expensive and dangerous way of temporarily fixing your finances. They should be seen as a last resort and investigated fully before you make any decisions.

  • Loan sharks: these are illegal and involve someone offering a loan at extremely high interest rates
  • Home credit or doorstep lending: this is a type of doorstep lending that is normally very expensive, even for just a few days
  • Second charge or second mortgages: these are referred to as a 'secured loan', which means they use the borrower's home as security
  • Logbook loans: these involve borrowing money using your car as security
  • Payday loans: these are short-term loans that are normally paid back over a month or two but with very high interest rates and other potential risks
  • Pawnbrokers: you either leave a valuable item as security for a loan or it is sold in return for cash, but interest rates are generally quite high
  • Debt consolidation loans: this is when you consolidate your loans into one big loan, normally secured against your home
  • Peer-to-peer loans: also known as 'social lending', people who want to borrow money are put in touch with those who will lend it. There could be fees involved, and again, they will generally have high interest rates.

Borrowing from family or friends

If you are considering borrowing money from friends or family, you need to have a plan in place for how and when you start to pay them back. Make sure you can both afford it. Work out a budget and decide how you are going to spend the money. 

More information and advice

It can be hard to know who to turn to for advice. You could start by speaking to the Money Advice Service, which offers free and unbiased information. Call the advice line on 0300 500 5000 (English) or 0300 500 5555 (Welsh).

You can also get lots of information and advice about finances and debt from the Citizens Advice Bureau in England and Wales, Citizens Advice Scotland or Citizens Advice Northern Ireland.

Where next? 

Updated July 2017, next review due 2018.