Borrowing money - the basics
Borrowing from your bank can be a very useful way to help you deal with life's ups and downs and smooth out the gaps between your income and expenditure. It can also help you to pay for larger purchases (for example a car or holiday) and spread the cost so that you can enjoy the benefit straight away, rather than saving up first.
Used sensibly, borrowing money can be a good way to manage your finances. The key is to make sure you remain in control of your money, making sure that you can repay the money comfortably and never overstretch yourself financially.
Borrowing of course comes at a cost by way of interest repayments and sometimes fees and charges, so it's always worth shopping around to find the right product for you.
A simple way to do this is to create your own budget plan by listing your income and expenditure. By adding up all your monthly income (such as salary and any benefits you may receive) and deducting everything you pay out every month, you'll be able to see how much spare money you have each month and from this you should be able to work out what you could afford to repay. The key here is to make sure that when you're adding up your expenses that you include everything - it's surprising how the small things can really mount up and make a difference.
Try our budget planner tool to help you build your own budget plan.
- Need help with budgeting, borrowing and/or planning for the future? Try the FSA's Financial Healthcheck or Visa Europe's Better Money Skills website. When working out your budget look back through old bank statements - this may help to remind you of those one-off expenses that you'll need to include in your expenditure.
- Banks are committed to helping you make financial decisions that best suit your circumstances. They want to help ensure that you do not take on more borrowing than you can afford to repay and then have trouble making repayments as they fall due.
