Interest-free loans

Quick answer: Most lenders don’t offer personal loans that stay interest-free for their full term. But you might qualify for a government Budgeting Loan or Budgeting Advance. Other ways to borrow with no interest include 0% credit cards, interest-free overdrafts and 0% retail credit. Check the terms and repay on time.

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Interest-free lending can help you spread a cost without adding interest, but these offers have conditions. Check the fees, end date and repayment rules before you borrow. The provider could end the 0% offer or add charges if you miss a payment or break the agreement.

Credit Expert at Experian

What our expert says

Make sure you can afford the monthly payment and any fees. Look at the total amount you’ll repay too.Jacqui Hamilton, Experian UK

Can you get interest-free loans?

Most standard types of loans charge interest. Some lenders offer a 0% promotional period, but it could end before your final repayment. A 12-month interest-free loan may be retail finance, buy now pay later, or another credit agreement rather than a standard personal loan.

Check whether you can clear the full balance during the 0% period and whether the provider charges any fees. If interest starts before you repay the debt, you will pay back more than you borrowed.

Can I get an interest-free loan from the government?

Some government interest-free loans support people who receive certain benefits. A

can help cover essential costs, such as furniture, clothes, rent in advance, moving costs or travel within the UK.

To qualify, you must have received one or more of these benefits for the past six months:

• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment and Support Allowance
• Pension Credit

A Budgeting Loan is interest-free, so you repay only what you borrow. The Department for Work and Pensions takes repayments from your benefits.

You cannot get a Budgeting Loan if you receive Universal Credit, New Style Jobseeker’s Allowance or New Style Employment and Support Allowance. If you get Universal Credit, you might qualify for a Budgeting Advance instead.

You can check the requirements and apply for a Budgeting Loan online or by post.

Interest-free loan alternatives: types of 0% interest credit

A 0% credit card, an arranged overdraft or retail credit agreement can be a loan alternative. Each option has different fees, time limits and repayment rules. Check what happens when the interest-free period ends before choosing 0% interest credit.

0% credit cards

With a 0% credit card, you can repay the balance before the interest-free period ends. Types include:

• Purchase cards, which can help you spread the cost of a purchase.
• Balance transfer cards, which let you move existing credit card debt to a card with a 0% period.
• Money transfer cards, which let you transfer money from the card to your bank account.

Make at least the minimum payment on time, stay within your credit limit and clear the balance before the 0% period ends. The standard interest rate then applies to any balance left.

You may need a good credit score to qualify for a 0% card. Check your free Experian Credit Score to get an idea of how lenders see you. You can also find ways to improve your score.

Interest-free overdrafts

An arranged overdraft lets you borrow through your bank account. Some banks offer an interest-free buffer up to a set amount. The bank could set a time limit and charge interest after the offer ends or if you exceed the buffer.

Read more about how an overdraft works, then check the limit, interest rate and repayment terms before using one.

Buy now pay later

Buy now pay later (BNPL) lets you delay payment or split a purchase into instalments. Many plans do not charge interest if you follow the repayment plan. Missing payments can lead to fees, debt collection and information appearing on your credit report.

Read more about how buy now pay later works and always check the terms before you buy.

PayPal Credit

PayPal Credit can offer short-term, interest-free credit on eligible purchases. If you make purchases on different days, each one can have a different end date. Track each date and repay the balance before interest starts. Borrow no more than you can afford to repay.

What about low-interest loans?

A low-interest loan might suit you if you need to borrow a larger amount or repay it over a longer period. Many personal loans have set monthly payments and a fixed end date, which can help with budgeting. You’ll still pay interest, so include it in your monthly budget before you apply.

Compare the annual percentage rate, rather than the interest rate alone. APR includes interest and compulsory charges. Check the monthly payment, total amount repayable, loan term and early repayment conditions. A longer term could reduce the monthly payment but increase the total interest you pay back.

A loan with a lower interest rate can still cost more if you choose a long repayment term. Small, low-interest loans can have higher APRs than larger loans. Borrow only what you can afford and compare the total amount you’ll pay back altogether.

Before applying, check your eligibility to understand your chances of approval without affecting your credit score. If you have a limited or poor credit history, our guide to loans for bad credit explains the options and risks.

You can compare and learn more about low-interest loans with Experian. Just remember, we’re a credit broker, not a lender.