Borrowing money during the Coronavirus outbreak

Many people will find their finances stretched due to the outbreak of Coronavirus (COVID-19). Whether you are self-employed and have faced a sharp reduction in income, your employer has made you redundant, or you are currently on Furlough, you will want to know how to support yourself throughout these unprecedented times.

We’re looking into whether borrowing money in the current climate is the best idea, and if it’s absolutely necessary, how should you do it?

Should I borrow money during the Coronavirus outbreak?

If you need to borrow money to pay your bills or debts, we’d advise you get in touch with your current lenders to see how they can best support you through the Coronavirus pandemic.

The Government has asked lenders to offer payment breaks to give people breathing space and more time to pay back what they owe. Banks have been asked to freeze interest on loans and credit cards, so we recommend speaking to an adviser to see what help is available to you.

Acting quickly may also protect your credit score in the long-term too, so seek advice as soon as you can. Find out more about what your creditors are doing to help before you make any decision.

Where should I borrow money from during the pandemic?

First of all, you should see what financial support the Government can give you. A comprehensive list of guidance for individuals and business owners can be found on the GOV.UK website and you should see what help is available before borrowing elsewhere.

If you have exhausted all avenues for Government support – whether living on benefits, self-employed or an employee – there are borrowing options available to you. We will run through a few options, but we must remind you that failure to keep on top of your repayments could affect your debt level, credit score and possibly your personal relationships.

Credit cards

There are many different types of credit cards available and if you’ve been looking after your credit score, you could qualify for a 0% interest credit card. This means you’ll pay nothing in interest and charges over a set time period. Because of this, such credit cards may be a viable option if you need to cover essential expenses.

They are also useful should you need to split the cost of a large purchase over several payments. There’s also the added safety of purchase protection with credit cards; purchases between £100 and £30,000 are protected, so if something happens, you can claim the cost of your purchase back.

Not everyone will be offered a 0% interest rate, however. Some cards charge high rates of interest, which can then increase should you miss a payment. Missing payments will adversely affect your credit score, which will then impact your ability to borrow in future.

Because credit cards provide immediate funds, it can be easy to find yourself in problem debt if you’re not monitoring your spending. If this is the route you decide to go down, make sure you don’t miss a payment, and always try to pay back more than the minimum amount required.


Overdrafts are arguably the most common type of credit available, and most people have easy access to one.

If used correctly, they can help you avoid fees from bounced payments (when there’s not enough cash in your account to make a direct debit or standing order payment).

Overdrafts should only be used as a short-term solution. Typical daily fees can be up to £3 per day, before you’ve factored in the added interest you could be paying. As ever, our advice is simply to use caution; don’t end up spending more than you can afford. If you are struggling to pay back your debts, you should seek professional advice.

Personal loans

Offered primarily by banks and building societies, a personal loan involves borrowing a fixed sum of money over a fixed amount of time, at a fixed interest rate.

Personal loans are generally suited to those who need to borrow a large sum of money. When borrowing high amounts, it’s important to research the interest rates and annual percentage rate (APR) on the money you’re borrowing. This is essentially the cost of borrowing it, so the higher the cost, the more you’ll end up paying back.

Payday loans

Payday loans are advertised as a quick fix, offering easy access to cash with high levels of interest attached. You’ll usually be expected to pay this type of loan back a month after taking it out, so it’s important that you know the pros and cons when agreeing to the loan.

If your income is likely to be impacted for a while as a result of Coronavirus – such as if you’re out of work or on low/reduced income – you could end up paying a lot of interest and charges on your payday loan, so we would recommend avoiding this at all costs.

Be wary of loan sharks

At this difficult time, many loan sharks are preying on the vulnerable. They will target those who struggle to get credit through a regulated bank, because of a bad credit rating for example.

Loan sharks are often illegal lenders and should not be dealt with under any circumstances. They are likely to use underhand tactics to get you to agree to taking out a loan, and intimidating measures to collecting debts.

If you want to find out if a lender is authorised by the Financial Conduct Authority and therefore legitimate, see if you can find them at If they don’t show up on the database, stay well away.

Other alternatives

Family and friends

Borrowing from your loved ones carries much less financial risk than borrowing from a registered lender. It’ll also cost you less; it’s unlikely that your family and friends would charge the same as any high-cost lenders, if at all.

In these unprecedented times, it’s important that families stick together. By setting out reasonable borrowings terms at the outset, you can avoid difficult situations arising as a result of the money not being paid back.

Credit unions

Credit unions are essentially non-profit versions of banks. Membership to a credit union allows you to open current and savings accounts, as well as the option to withdraw credit cards and loans.

Credit unions present themselves as friendlier, and less corporate than the bigger banks. They also tend to offer much more forgiving rates on the loans and credit cards they give out, meaning you can pay the money back at a rate you can afford. Find your local credit union to see what options are available to you.

We understand this is a worrying time for everyone, and that income could fluctuate daily as the situation unfolds. Please think very carefully before entering into a borrowing agreement and seek Government support before doing so.

Rest assured we’re always here should you need debt advice. If you feel you’re in trouble as a result of over-borrowing, start a conversation with us today.