Borrowing can be done in a number of ways. Today, there are several popular borrowing methods implemented by major banks and lending companies. Let us take a look at these systems and how we can benefit from them.

All types of borrowing follow the same basic rule – you borrow money and you pay the interest rate depending on the lender's protocol. Before you can borrow money, you have to fill out an application form and get approved by the lender. Usually, credit scoring is initially done by the company to determine the risks in lending money.

Bank Overdraft

Bank overdrafts can be authorised or unauthorized. The first type of overdraft is arranged in advance with your banks. The lender and the borrower will agree a limit up to which you can borrow. You can withdraw the money from your current account without minimum repayment.

An unauthorised overdraft is where you haven't agreed an overdraft facility with your lending company. You deliberately or accidentally withdraw the money in your account which can result to extra charges. If you do not pay the charges imposed by the bank, the credit can build up easily.

Personal Loans

Like bank overdrafts, a personal loan can be done in two ways – secured and unsecured. In a secured loan, you have to be home owner to avail the system. You use your house – a property – as a guarantee. If you have difficulty paying the loan, the lender could repossess your house and sell it to get their money back.

Unsecured loans have serious consequences compared to the secured type. Once you miss paying the contracted rates, the lender can repossess your home and would even legally oblige you to pay back the loan as agreed.

A personal loan is usually borrowed as a fixed amount. The money has to be paid in installments with a certain interest rate. Some lenders charge low rates whilst others may ask for higher interest rates.

In-Store Finance, Credit Cards and Store Cards

• Store Cards

Store cards are like credit cards. A spending limit is given to the card holder once the application form has been processed. Compared to other loans, the store cards tend to charge higher interest rates. The store card's use is also limited since you can only use them at a particular group of stores.

• In-store Finance

In-store finance usually helps a customer purchase expensive items. Most stores offer a 0% interest rate so the consumers can afford to pay a product.

• Credit Cards

Credit cards are a common way to pay goods and services. Instead of using cheques or cash, people use their debit cards to purchase various types of items. Like a personal loan, you can use these cards at a certain limit. You also have to process an application form before you can avail these cards. If you miss paying your monthly charges, you can expect the total amount of payables to increase every month.