Are we a nation of people who borrow money in order to spend? There is £200 billion worth of unsecured consumer debt in Britain, according to the Bank of England. What’s your debt like? Learn how to borrow money responsibly in this article from Quick Loans Express.


In this article about borrowing money safely we shall examine:

Story Highlights:

  • Do Britons borrow money excessively?
  • When is it bad to borrow money?
  • Defining “bad debt”
  • Paying credit with credit
  • When is debt good?
  • Responsible lending practices
  • Your credit score and borrowing money
  • How to compare loans
  • Hidden fees and bank charges
  • Real vs advertised interest rates
  • The borrower’s checklist from the Money Advice Service
  • The future of credit finance
  • Conclusions

Do Britons Borrow Money Excessively?


The Bank of England has discovered the UK to be a nation of borrowers. According to their polls, the average British household has around £7,400 of unsecured debt. These debts are made up of short term loans, credit card spending and other forms of credit not secured against valuable assets, such as homes or cars. Our national habit of borrowing has been on the rise by 7% for three consecutive years. Although many people borrow money safely, as a nation, we are borrowing more and more.

When Is It Bad to Borrow Money?

Defining Bad Debt

The short answer is that it’s bad to borrow money to pay for”extras”. Swiping your credit card to pay for expensive clothing, luxury holidays, and fancy cars are all examples of bad debt. Everyone wants nice things, but if it’s not a necessity, then you shouldn’t borrow money to pay for it.

It can be very tempting to borrow money to buy things we want right now. Our generation is one of instant gratification, and we are conditioned to satisfy our every whim immediately. From instant pudding to instant payday loans, we are used to getting what we want when we want it, without considering the consequences. However, this attitude can be particularly harmful when it affects the way we borrow money. You might want the instant funds to pay for that exotic holiday. However, you won’t want the high interest rates you’ll face when you can’t repay your loan on time.

If you can only afford a staycation, perhaps you could set yourself a goal and save towards a fancier holiday. Although it is tempting to borrow money for “extras,” you should strive to avoid bad debt at all costs.


Putting supermarket food bills onto a credit card and not clearing off the balance is also considered bad debt. When your credit card balance is very high, that 18% interest can add up to a lot of money.

People sometimes take credit to pay off other debts, plugging holes in their finances with more borrowed money. People who find themselves stuck in a cycle of borrowing to repay other debts are struggling with bad debt.

Debt Consolidation Loans

Some people owe money to a number of different creditors which can be overwhelming. One option is to take a debt consolidation loan and borrow a large sum to cover all of their debts. This way, they only have a single loan to repay. The problem arises when they cannot cover all of their debts with this “ultimate loan” are saddled with more debt.


Some debt consolidation loans require security and many borrowers use their homes as a guarantee. These loans can be very risky, as the borrower can lose their home if they can’t uphold the payment schedule. Even when they manage to repay everything, many people aren’t disciplined enough to stay out of bad debt for long.

Is Debt Ever Good?

Despite all the negative aspects of debt, some debt can, surprisingly, be good for you! Good debt is when you borrow money responsibly to achieve a specific goal. Some common forms of good debt are mortgages, student loans, and business loans. These are all significant debts that people take on to invest in their financial welfare. There is a crucial difference between bad debt and good debt. Bad debt is a vicious cycle of borrowing to meet immediate needs or wants. However, good debt is an investment which can help you profit in the long term.


When you take out a mortgage, you make monthly payments towards owning your home in the future. A mortgage is an investment to help you build your assets in the long term, rather than paying a landlord indefinitely. In a similar vein, taking a student loan allows people to gain higher qualifications. It could set them on a successful career path with higher pay than they could hope to get without higher education. When a person takes out good debt, they identify a specific cause that will help them in the long term. Furthermore, they have set out a plan to repay the loan in an affordable time frame.


FCA Regulations


The financial crisis of 2008 originated with poor banking practices. Banks lent money more freely, which led people to borrow money that they could not afford to pay back. Many people defaulted on their loans, and several financial institutions collapsed. In light of this, the government imposed regulations on financial institutions, instituting specific criteria for responsible lending practices. All kinds of quick loans UK, from payday loans to mortgages, now have much stricter criteria for borrowers. This is in an effort to avoid lending to people who can’t afford to repay loans.

The Importance of a Good Credit Score

Lending is risky business and lenders need to be sure they’ll have their money returned according to the loan terms.Most responsible lenders perform credit checks on their applicants to assess their creditworthiness before funding them a loan. It’s very helpful to have a good credit score, as this indicates to lenders that you are very creditworthy. A good credit score can help you get a loan, increase your credit limit, and get better interest rates. Building and maintaining a good credit rating is an important part of building your creditworthiness.

When you are looking to borrow money, you want to get the best deal on the market. You might think to apply for several loans to see which one gives you the best offer. However, many people wrongly assume that their credit score is not affected by their “comparison shopping”.


Lenders put a mark on customers who ask for credit, and too many marks can affect a person’s credit rating. It’s important to be aware and try to compare with companies who offer a loan calculator or theoretical affordability assessment. These types of comparison tools give you useful information without affecting your credit score.

How to Safely Borrow Money

There are a few things to consider when calculating the cost of a loan. The total cost will depend on the amount you are borrowing, any contract setup fees, and the interest rate. Additionally, you must factor in the length of the borrowing term and the number of repayments. The first rule of safe borrowing is to borrow the amount of money that you need, not more and not less. If you borrow too much, you will be stuck with higher repayments and accrue interest charges you could have easily avoided.

On the other hand, if you borrow too little, you may find that you need another loan to cover your expenses. Applying for two loans close together reflects badly on your creditworthiness and can wreck your credit score. Therefore, it’s extremely important to honestly assess the amount that you really need to borrow. The second rule to safely borrow money is to repay the loan as fast as possible to avoid excessive interest.

Watch out for fees and costs

Although government regulations require lenders to be more transparent regarding their fees, many hide these costs in the small print. Here are some of the most obvious charges to check for before committing to a loan:


It’s important to beware of early repayment fees, which penalize the customer for repaying the loan too quickly. Consumer regulations allow lenders to charge 58 days worth of interest when you pay off a loan agreement early. Alarmingly, this alone can add up to hundreds of pounds! Other charges can range from £2 to £3, but can stack up quickly. Make sure to clarify if your contract includes these fees before entering into an agreement with any lender.

Find Out the Real Interest Rate Before You Borrow Money

Did you know that lenders can advertise fantastic interest rates, but only have to provide them for 51% of their customers?! Many loans work with variable rates of interest. This can mean paying less or much more interest back than the advertised rate due to fluctuations in the economy. The Bank of England’s base rate is now at a historically low percentage. This means that the rates can only go skywards. The interest on the average personal loan is around 4%, compared to the average interest on credit cards, which is 18%. Overdrafts can vary in price, depending on the bank, but they are usually around 20% plus bank charges. It’s important to get an accurate estimate of the real interest rate you’ll be paying before committing to a loan.


Advice from the Money Advice Service

The Money Advice service has been set up by the government to give free and impartial financial advice to British citizens. Although one in six UK adults are in debt crisis, only 20% seek help with their financial problems. It’s very easy to get sucked into a spiral of debt if you don’t exercise extreme caution before taking credit. The following list of questions come from the Money Advice Service website to encourage people to think before borrowing money safely. If a person answers “no” to any of these questions, then they could be at risk of taking on bad debt.

  1. Have I shopped around to get the best deal?
  2. Am I borrowing this money as cheaply as possible?
  3. Will I be able to cope if the interest rates rise in the future?
  4. Can I comfortably afford the monthly payments?
  5. Will borrowing this money improve my finances in the long run?
  6. Do I understand the risks if things go wrong?
  7. Do I understand the terms and conditions associated with borrowing this money?

If these questions can be answered positively by a prospective borrower, then they are on the road to borrow money safely.


What Lies in the Future of Credit Finance?

After Brexit, companies expect the finance industry to boom in the UK. However, Mark Carney, governor of the Bank of England, warned that they won’t lapse in regulations to attract new customers. Before the financial crisis of 2008, the credit market was booming. However, the sheer amount of unsecured debt caused many financial institutions to collapse. The Bank of England has warned banks to hold onto more money to protect themselves. Furthermore, if UK borrowing doesn’t slow down, banks may be forced to try and slow it by raising interest rates.

Conclusion: Can We Borrow Money Responsibly?

Borrowing money as an investment in your future when you can afford the repayments can be a good thing. When we borrow money safely, it allows us to own homes, attain higher education, and handle emergencies. We defined good debt, how to compare loans and avoid fees to help you borrow money wisely and responsibly. Taking on bad debt which you can’t afford for things you don’t need can cause you serious financial problems. However, by following guidelines, a person can safely borrow money and lead a financially stable and successful life.



PUBLISHED BY
Bryson Oakes
Bryson is the leading engine of the Quick Loans Express blog. He has worked in the financial industry for 15 years and is the go to man for all money-related tricks and tips. When he is not spreading the latest financial news, Bryson can be found playing cricket with his mates or running in the park with his dog.

The article "How to Borrow Money Responsibly- Ultimate Guide" was last modified on