Most of us will probably need to borrow money at some point in our lives. Whether it's getting your first car, buying a home, paying for your education or travelling the world, the major expenses in our lives can be much easier to manage with a responsible borrowing plan.
But what kind of borrowing is best for you? At HSBC, we offer several options - the right one will depend on your personal circumstances and what you need to spend the money on.
A credit card is generally a good option for everyday expenses. You have more freedom with your repayments compared to a personal loan, so it can be useful for splitting the cost of more expensive purchases over several months. These could include household appliances, unexpected emergency costs such as car repairs or occasional treats such as a meal at a nice restaurant or a new suit.
Remember that like all loans, a credit card will charge interest - meaning the amount you repay will be more than the original cost of the purchase. You should also be extra careful to use your credit card responsibly - if you become reliant on it to cover everyday expenses, you could start quickly building up debts that will be difficult to repay in the future.
Top tips: Repay your credit card on time every month. Paying more than the minimum repayment can help you to save money in the long run and pay the card off more quickly. Try to stay below 75% of your total credit limit to keep your debts under control.
A personal loan can help you to fund larger one-off purchases, such as buying a new car or bike, refurbishing your house or taking a trip abroad.
With a personal loan, you borrow a set amount of money and agree to repay it by a specific date. You will do this through regular repayments over an agreed time period. Like a credit card, a personal loan will include interest, so your total repayments will be greater than the amount you receive.
A personal loan is a little less flexible than a credit card, so it is generally better for making larger purchases and making a clear repayment plan that you can stick to, rather than dipping into your funds from time to time for smaller expenses.
Top tips: You can reduce the overall cost of a personal loan by repaying it more quickly. Check in with your loan provider every few months to review your repayment plan and discuss whether you could refinance to reduce your interest costs.
An arranged overdraft allows you to make purchases and withdraw cash even after your bank balance drops below $0.00.
This can be useful to help you to manage your monthly expenses and avoid running out of money - which can incur larger costs if you miss a mandatory repayment.
You will pay a monthly interest rate on your overdraft, so this should not be considered free money. You should generally aim not to go too deep into your overdraft, or to be in it for a long period of time, as this can indicate that you are not managing your finances properly.
Top tips: Use your overdrafts for emergencies only. Try to ensure your bank balance is in credit at the end of every month. If you're worried that you're losing control of your overdraft, look at ways to cut down on your monthly expenses. You can speak to a member of our team at your local branch, they may be able to discuss more cost-effective ways to manage your money.
For many people, buying property is one of the biggest expenses you'll take on in your life. A mortgage means the bank will offer you the money to pay for your home, which you'll then repay over a number of years.
Because mortgages are generally much larger than regular personal loans, you should expect to pay them off over a much longer period of time - up to a maximum term of 30 years. Needless to say, this isn't a commitment to enter into lightly.
You may need to provide a down payment - generally around 20% of the total value of the property - to prove you're in a position to repay your mortgage. However, if you're a first time buyer, you may also be able to secure 100% financing if a family member or loved one is able to provide security in the form of cash or capital.
Top tips: Speak to a mortgage specialist to explore your options before you apply. Make sure you're confident you'll be able to keep up your repayments - your home may be repossessed if you fail to do so.