The cheapest loan is a credit card

These credit-card rates are so cheap that they beat most of the cheapest personal loans!

If you want to borrow a few thousand pounds, then where's the cheapest place to look?

For sums below, say, £10,000, taking out a new mortgage would be prohibitively expensive, because of the various fees involved. Likewise, remortgaging is unlikely to be cheap enough to make this effort worthwhile.

Cheap loans

In practice, you're left with one option: an unsecured personal loan. Usually, these are available in amounts from £1,000 to £25,000, repayable over one to 10 years at a fixed rate of interest. What's more, as these loans are unsecured, they do not put your house at risk if you can't keep up repayments.

In The cheapest loan around, we revealed the UK's cheapest personal loans, with low rates ranging from 6.1% APR to 6.4% APR for advances of £7,500 to £15,000. However, several of these loans come with strings attached.

For example, the market-beating 6.1% APR at Nationwide BS is available only to existing customers. Also, some lenders require applicants to earn a minimum salary of, say, £20,000 a year. In addition, these headline rates won't be granted to all applicants. In fact, just over half (51%) of successful applicants will be offered these typical APRs, with the remaining 49% given higher rates.

Play your cards right

But if you're crafty there are two low-cost ways to borrow that don't involve signing up for a fixed-rate, fixed-life loan. Instead, they involve a bit of card-play using credit cards to borrow over long periods.

1. Low standard rates

The first way to borrow on the cheap is to spend on credit cards which charge low standard rates. Although the average rate charged by credit cards on purchases is over 19% APR, some cards undercut this average by a long way.

Here are the three cheapest low-rate cards:

The Sainsbury's Low Rate Credit Card offers the lowest standard rate on the market, a remarkable 6.9% APR. What's more, balance transfers to this card incur no fees, making it a winner for lifetime balance transfers, too (see below).

The Barclaycard Platinum Simplicity card has a slightly higher rate of 7.9% APR on purchases and balance transfers, but adds 1% Reward Money via the Barclaycard Freedom benefits scheme. In third place, the Capital One Click MasterCard charges 9.9% APR and offers exclusive online and brand discounts, plus a decision in 60 seconds.

2. Lifetime balance transfers

Another way to borrow over many years at low rates is to make use of lifetime balance transfers. For example, you could make a large purchase on your existing credit card and then immediately shift this balance to one of these two Best Buy lifetime balance transfers:

Note that these are the two top cards in the previous table. As well as being Best Buys for low standard rates, they also beat the market for no-fee, lifetime balance transfers.

It's worth noting that, unlike personal loans, the rates charged by these cards are not fixed, so they could increase over time. However, the law forbids any rate increase in the first year, plus you can reject future rate rises and instead repay your balance over an agreed period.

Finally, as with all transfer cards (including 0% balance transfers), you cannot transfer balances from cards issued by the same lender. Therefore, you cannot shift balances from more expensive Barclaycards to this low-rate Simplicity card, which is a shame!

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