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MSE’s Academy of Money
MSE’s Academy of Money

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Session 3: Borrowing money


Martin Lewis introduces Session 3 on borrowing, exploring the good and bad reasons people may have for getting into debt.

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Video 1 Introduction to Session 3
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While borrowing should never be done lightly, and should always be for something affordable and budgeted for, if people are able to manage their debts sensibly and repay money at least on time or, better still, as quickly as possible, then there is no need to panic. After all, most people cannot afford to buy a home or car up front so need to borrow cash, which in turn helps to fuel the various markets.

In the UK in December 2023 personal debt amounted to an astonishing total of £1.84 trillion. That is £1,840 billion pounds of borrowed money that is owed by households in the UK.

The good news is that for many people, borrowing doesn’t cause them financial problems. But for some people repaying borrowed money is a problem.

Yet, some people cannot borrow at a reasonable cost due to their poor credit status. Their circumstances, often related to being on low incomes, may force them to use expensive sources of borrowing such as high-cost short-term credit – and the cost of borrowing in this way may mean their financial difficulties worsen.

This session of the course focuses on what you need to know to be able to borrow effectively on the best terms, and on what you need to do to make sure borrowing money is helpful, rather than the source of financial nightmares.

You will also see that the ability to borrow and the cost of borrowing are determined both by things you have some control over (such as your financial position and credit history, which affect your attractiveness as a borrowing customer) and things which you cannot control (like the prevailing level of interest rates).

Having been at historic lows during the Covid-19 pandemic interest rates here in the UK and elsewhere around the world have risen quickly since 2021 in response to the sharp rise in price inflation. This is making it more costly to borrow money and, therefore, more important to make effective borrowing decisions.

After studying this session, you should be able to:

  • understand who you can borrow from and what products are available
  • understand what affects your credit score and what you can do to manage it
  • know when borrowing is sensible and when it is reckless
  • understand what determines the cost of borrowing money
  • understand the relative cost of different ways of borrowing.

This Session is one of a suite comprising the course MSE’s Academy of Money and has been made possible by financial and content contributions by