Borrowing responsibly: loans, credit and buy now, pay later

Borrowing means using money now that you must repay later. Used carefully, it can help: spreading the cost of a laptop you need for your course, or covering a short gap until a confirmed payment arrives. Used carelessly, it can follow you for years.

This guide is general education, not personal debt advice. If you are already worried about debt, skip to the section on getting help.

Borrowing may make sense when:

• The need is genuine and important.
• You have a realistic, specific plan to repay.
• The repayments fit your budget without cutting essentials.

It is usually a warning sign when:

• You are borrowing for everyday costs month after month.
• You are borrowing to repay another debt.
• You are not sure how, or when, you will repay.

If the gap is regular, the answer is usually in your budget, not in a loan. Our guide to building your first budget can help.

• Loans from a bank or lender: a fixed amount repaid in instalments.
• Credit cards and overdrafts: flexible borrowing, often with high costs if not repaid quickly.
• Buy now, pay later (BNPL): splitting a purchase into instalments, often offered at online checkouts.
• Shop or phone credit: paying for a phone or item over time.
• Informal loans from family, friends or community members.

The most important number is not the monthly payment. It is the total amount you will repay. The difference between that total and what you borrowed is the cost of borrowing: interest plus any fees.

Where lenders are required to show it, the APR (annual percentage rate) helps you compare the yearly cost of different loans, including most fees. A higher APR means a more expensive loan.

In this illustrative calculation, borrowing $500 for a year costs nothing with no interest, $56 at 20% a year, and $242 at 80% a year. The same laptop can cost very different amounts depending on how you pay for it.

Check:

• How much you will borrow and how much you will repay in total.
• How many payments, of what size, on what dates.
• What happens if you pay late: fees, extra interest, effects on your credit record.
• Whether you can repay early, and at what cost.

If a lender won't tell you these things clearly, don't borrow from them.

BNPL can feel different from borrowing because it is quick and often interest-free if you pay on time. But it is still debt, and several small plans can quickly add up to more than you can repay.

Protections vary by country. For example, in the UK the Financial Conduct Authority began regulating BNPL on 15 July 2026. Lenders must now check whether you can afford to repay, tell you the amounts and any late fees before you agree, contact you if you miss a payment, and offer support if you struggle. You can also complain to the Financial Ombudsman Service. Check what applies where you live.

Informal loans are common and can be kind and interest-free. They also carry a risk to relationships. Protect both:

• Agree the amount and repayment plan clearly, and write it down, even briefly.
• Say honestly if repayment might take longer than hoped.
• Repay as agreed, or talk early if you cannot.

Many readers prefer to avoid interest for religious reasons. An interest-free loan made to help someone, often called qard hasan, is one example. Our guide to Islamic finance basics explains more.

• Borrowing to pay for food, rent or other debts.
• Missing payments or paying only the minimum each month.
• Hiding debts from family.
• Feeling anxious every time a payment is due.
• A lender asking for a fee before giving you a loan. This is a common scam. Genuine lenders take their fees from the loan or the repayments, not before.
• A lender who is not licensed, uses threats, or holds your documents as security.

If debt is becoming a problem, act early. Speak to lenders before you miss a payment; many are required to help, or have hardship options. Look for free, independent debt advice in your country. In the UK, for example, the government-backed MoneyHelper service points people to free debt advice. Universities often have student money advisers too.

• I have tried my budget and savings first.
• I know the total amount I will repay, not just the monthly amount.
• The repayments fit my budget without cutting essentials.
• I have read what happens if I pay late.
• The lender is licensed and has not asked for an upfront fee.
• If it is a family loan, we have agreed the plan in writing.