Borrowing

It isn’t usually a good idea to borrow money to pay debts, and you should always check what your other options are first. If you do decide to borrow you should:

  • look for the cheapest type of borrowing
  • avoid store cards, pay-day loans, door-to-door lending and illegal lenders
  • remember that if you don’t keep up repayments, your home or other goods will be at risk.

Having cancer may be a factor if you’re taking out life or health insurance with a credit card. It’s not usually compulsory to take out insurance as part of the loan.

Many lenders use your credit score to assess how likely you are to keep up with repayments. Your illness may affect your credit score, for example if you’ve stopped work, borrowed a lot or if your income is reduced. If your lender decides you are high risk, they may not lend to you. Your lender might also check your credit file while assessing your credit score.

Types of borrowing include:

  • family and friends
  • bond committees
  • credit unions
  • mortgages/ secured loan
  • credit card
  • overdraft.

Before borrowing money

It’s important to explore all the possibilities first before you consider borrowing money.

  • Make sure you’re getting all the income you’re entitled to.
  • Use an emergency fund if you have one (money you’ve saved for an emergency, for example in a savings account).
  • Claim on insurance and pensions.
  • Budget and make savings if possible.

Borrowing to deal with existing debts you can’t repay is rarely a good idea. Talk to a trained debt adviser first about options for dealing with your debts or credit commitments. You can speak to one by calling StepChange Debt Charity.

If you do borrow money, it makes sense to choose the cheapest type of borrowing. See the table below of the most common types of borrowing you could consider, listed from the cheapest to the most expensive.

Whenever you borrow money, you should try to have a clear idea of how you’ll make the repayments. You could use our online budget planner to help you do this.


Borrowing tips

  • Check what other options you have before borrowing.
  • Look for cheap ways to borrow.
  • Try not to use store cards, pay-day loans, door-to-door lending and unauthorised overdrafts.
  • Remember that if you don’t keep up payments on a secured loan (a loan that is backed up by something you own, such as your house or a car) that asset will be at risk as the lender has the right to take it. A mortgage is a type of secured loan.
  • Avoid illegal lenders (loan sharks). They charge excessive fees and typically use aggressive tactics if you cannot repay. You can report illegal lenders to government Illegal Money Lending Teams on 030 0555 2222 (England), 0800 074 08778 (Scotland) or 030 0123 3311 (Wales). In Northern Ireland, call the Trading Standards Consumerline on 030 0123 6262.


How cancer might affect borrowing

Your health isn’t directly relevant when you are taking out a loan or credit card, but it can become a factor if you’re taking out insurance or if your credit score has been damaged because of the effects of illness. There is more information below about your credit score.

Insurance linked to a loan or credit card

Generally, you shouldn’t be asked any questions about your health when you borrow money, but you will be if you take out any related life or health insurance. If you don’t take out insurance, you should be able to get the loan or credit card without having to give details of your health.

You may be given the impression that taking out insurance is a compulsory part of a loan deal, but this is seldom the case. In particular, you normally don’t have to take out payment protection insurance (PPI) with a loan, however much the salesperson recommends that you do. PPI is insurance that makes payments for a loan or credit card if you become ill or unemployed. It doesn’t cover health conditions you already have at the time you take out the insurance. It often doesn’t cover self-employment and casual jobs.

The right insurance can provide valuable protection for you, but you should be treated fairly by firms when you buy it. If you want this type of cover, you should shop around.

We have more information about insurance.

Your credit score

Many lenders use credit scoring to work out the likelihood of you keeping up the repayments if they lend you money. If they decide you’re high-risk, they may refuse to lend to you or charge you a higher-than-average interest rate.

Your credit score depends on a variety of factors, such as how long you’ve lived in your current home, whether you own it, whether you’re employed and how long you’ve been in your current job, your marital status, your income and whether you have a bank account and existing loans.

Your credit score doesn’t depend directly on your health. But if health problems mean you’ve had to stop work, your income is reduced or you’ve already borrowed a lot, your credit score may be lower.

Loans from your local authority or loans made through Universal Credit are not credit scored, so you may qualify if your income is low and you’re claiming certain state benefits.

Credit unions and community-based lending schemes are more likely to lend to people with a poor credit score than other loan providers.

Credit unions and community-based lending schemes are more likely to lend to people with a poor credit score than other loan providers.

Credit referencing

Many lenders will use credit scoring to estimate how likely you are to keep up with repayments if they lend you money. Your credit score is a rating of how dependable you might be when repaying money.

Your credit score doesn’t depend directly on your health. But if health problems mean you’ve had to stop work, your income is reduced or you’ve already borrowed a lot, your credit score may be lower.

Your credit score depends on a variety of factors, including:

  • how well you’ve kept up with credit agreements in the past
  • how long you have lived in your current home
  • whether you own your home
  • whether you’re employed
  • how long you’ve been in your current job
  • your marital status
  • your income
  • whether you have a bank account and existing loans.

If the lender decides you’re high-risk, they may refuse to lend to you or charge you a higher than average interest rate. Loans from your local authority or loans made through the benefit Universal Credit are not credit scored, so you may qualify if your income is low and you’re claiming certain state benefits. We have more information about Universal Credit.


Main types of borrowing

The table below shows the main types of borrowing. We have listed these in order of cheapest to most expensive options. But which type of borrowing will be most expensive or cheapest for you depends on a number of factors. These include your credit rating and your personal situation. For more in-depth guidance about borrowing, contact StepChange Debt Charity.

TypeKey pointsWho to contact
Family and friendsMay be free, but can cause tension or financial difficulties if you can’t repay.
Bond committees and similar community schemesThese are informal local schemes. You usually need to pay a set amount into a central fund each week or month and can then borrow from the fund.Ask in your local community – for example, in places of religious worship.
Credit unionsCommunity or work based organisation that may lend to you. You’re encouraged to build up savings before you borrow, but some let you borrow straight away.Association of British Credit Unions.
Tel: 0161 832 3694.
Ace Credit Union Services.
Tel: 029 2067 4851.
Scottish League of Credit Unions.
Tel: 0141 774 5020.
Mortgage or secured personal loanThese are informal local schemes. You usually need to pay a set amount into a central fund each week or month and then you can borrow from the fund.To compare mortgages, call the visit the Money Advice Service.
Tel: 0300 500 5000.
Credit cardCan be a cheap way to borrow for short periods, but is costly over long periods – watch out for fees as well as interest.You could use a current credit card or see the money pages of newspapers or comparison websites to choose a new one.
Unsecured personal loanFrom banks and similar lenders. You don’t have to borrow from your own bank – watch out for fees as well as interest.See the money pages of newspapers or comparison websites.
Community Development Finance Institution (CDFI)Lends money to individuals and businesses who might otherwise struggle to access high-street banking.Responsible Finance.
Tel: 020 7430 0222.
OverdraftYour bank allows you to take money out and make payments even if you don’t have money in your account. Can be suitable for short periods. Moderate cost if you arrange it with your bank first, but costly if you don’t (this is called an unauthorised overdraft). Watch out for fees as well as interest.Your bank.
Store cardA type of credit card that can only be used in certain stores. Most are very expensive.Certain department stores.
Pay-day loanShort-term loan (for one or two months) at a very high cost. Don’t fall into the trap of renewing these loans for longer periods.High street money shops, websites.
Door-to-door lendingAlso known as home credit or doorstop lending. Convenient because you can pay in small amounts but very expensive. It can also be difficult to work out the overall cost, and the information can be confusing.Lenders usually approach you in person or by post or phone. Lenders need to be licensed by the Office of Fair Trading, otherwise they are loan sharks and should be reported.

Back to Managing your money day to day

Planning your budget

Having a weekly or monthly budget can help you manage your day-to-day finances.

Your income

Living with cancer may affect your finances. It’s important to make sure you have enough money to pay for your expenses.

Taxes

It’s important to make sure you’re paying the right tax. This includes checking if you are owed a tax rebate.