Depending on your circumstances and requirements, there may be a more cost effective means of borrowing money than getting a personal loan.

You need to consider how much you need to borrow and over what period of time.

Below are three alternatives to a personal loan with suggestions as to when they may become a preferred option over a personal loan:

credit card

If the amount to be borrowed is for a few thousand pounds or less, and you need to borrow money over the short term, consider a credit card.

There are a select few credit cards that do offer outstanding value. For example, the Egg credit card offers 0% interest on purchases for the first six months. So, even if you wish to borrow money against the card for a year (assuming you made a purchase on the card, not a cash advance), and you paid off the card at the same rate as you would have paid off an equivalent loan, you would make a considerable saving.

The possible disadvantage of a credit card is of course that you need to be disciplined in paying off the borrowed amount. Unlike a loan where a regular monthly payment must be made, the repayment amount on a credit card is down to you (subject to the minimum monthly payment). However, it is possible to set up a monthly direct debit payment to ensure you make regular payments against your card.

Then again, the fact that repayment amounts are at your discretion can also been seen as an advantage as you can adjust your payments to pay off the loan more quickly, if circumstances allow, or perhaps lower the repayment one month if unforeseen circumstances leave you short of money.

Another consideration is that you may benefit from additional 'perks' offered by some credit cards. For example, cash back on purchases and insurance cover for items purchased with a card.

If you do decide to use a credit card instead of getting a personal loan, make sure you are very selective in which card you go for. There is not point getting a card that charges you interest at 17.9% APR when you could get a personal loan at half that rate.

bank overdraft

On the whole, bank or building society overdrafts tend to charge an interest rate far greater than that of a loan. However, you usually only pay interest for the days you are overdrawn.

So, if you need additional money for just a few days each month, this approach may be an option.

When deciding whether this approach is a viable option or not, you will need to consider the interest rate charged by your bank and any annual or monthly fee charged for having an overdrawn facility. Always arrange the overdraft with your bank in advance or you will more often than not incur additional charges. Always read your bank's terms and conditions in detail.

remortgage

If you already have a mortgage you may consider unlocking part or all of the equity in your property, i.e. the different in value between your mortgage and the property's current market value.

If the amount to be borrowed is many thousands of pounds and you need to borrow that money for several years, remortgaging your property may be the answer.

The clear advantage of remortgaging is the lower rates of interest mortgages normally enjoy compared with personal loans.

We suggest that you contact a financial advisor in order to understand the pros and cons of remortgaging.

It is always important to remember that everyone's requirements and circumstances are different, so you should make a decision based on these factors as well as the benefits of each financial product.