Martin Lewis: What's the best savings account
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Although the financial guru only advocates borrowing money if it is essential, he has said that there are some ‘dirt cheap’ deals at the moment and has explained when it’s best to opt for a loan over a credit card.
When it comes to choosing a credit card or a loan to borrow money it’s worth listening to the experts.
As a general rule of thumb, zero percent credit cards are the best option for people looking to borrow anything from £100 to £5,000 according to the nation’s favourite money expert Martin Lewis.
In this week’s Money Saving Expert (MSE) newsletter he wrote: “Done right, zero percent credit cards offer super-cheap borrowing, as there is no cost whatsoever for up to nearly two years.”
However, he added: “Don’t borrow unless you need to. Ensure it’s a planned purchase, with budgeted for, affordable repayments. Borrow the minimum needed and repay as fast as you can.
For those who need to borrow money, making sure they get the best rate possible so that they are not repaying more than is needed is the number one priority.
Right now, MSE said that M&S Bank’s 22 months zero percent card is one of the best options.
It offers 22 months interest free borrowing if Britons spend £100 or more in the first 90 days – as well as £25 cashback on top of M&S reward points.
Alternatively, the Tesco Bank card offers a slightly longer period of 23 months interest free but it’s worth noting that not all accepted applicants will get this rate for the full term.
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MSE added: “The zero percent is only for spending on the card, not for withdrawing cash, so avoid that.
“Ensure you plan your repayments to clear the debt before the zero percent ends or it jumps to the 21 percent representative APR.
“The best way to do this is to set up a direct debit to repay a fixed amount like a loan.”
For people looking to borrow between £3,000 and £25,000 a loan might be better, he explained.
MSE said: “This is your prime route for bigger borrowing. While a card might be good to use to replace a broken fridge, a loan is a better option if you must replace a whole kitchen.
“Sadly there’s no way to do this at zero percent. You will pay interest, therefore there is a real cost, so think carefully before you embark.
“Though rates are historically cheap right now.”
Although there are a number of great deals currently on the market, Martin recommended people check their eligibility first and reminded them that not everyone gets the rate promoted in the advert.
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Some of the best loan deals currently available for Britons include Hitachi which is offering a rate of 9.8 percent on loans between £1,000 and £3,000 and Sainsbury’s which is charging 3.4 percent interest on loans between £5,000 and £7,499.
MSE also mentioned Cahoot and Santander for those looking to borrow £7,500 plus.
And for even bigger amounts, MBNA, Tesco and TSB could be worth a look.
As not everyone will be accepted for every credit card or loan, it’s best to use a free eligibility checker first which won’t affect someone’s credit rating.
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