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We all sometimes spend far more than we mean to. It is all too easy to get the things we want without stopping to work out how we will pay for them when the bills roll in.

There are lots of times when it makes sense to borrow money, either by getting credit or taking out a car loan. The trouble is, it is not always easy to work out exactly how much it will cost us. There are so many competing lenders to choose from that most of us need advice on how to get the best deal.

If you are going to borrow money you will have to repay it sooner or later and the chances are that you will have to pay back more than you borrowed in the first place. Before you know what repayments you can afford, you need to work out how much of what you've got coming in you are already spending. Remember to leave a margin for emergencies.

If you write down everything you spend, it will be easier to see if you could save money somewhere. Maybe you will find ways to cut back on things that are not essential so that, if you do still need to borrow, you won't get into difficulties.

Credit, cash or save up?
The advantages of using credit or a loan to buy something are:

If you need something urgently, you can get it right away instead of having to save up the cash.
You can spread the cost of a big item over a period of time (but you can do this by saving up too).
It is convenient - you don't have to carry large amounts of money with you.
The disadvantages are:

Some of your income each month is tied up in the repayments.
If your circumstances change - for example, you lose your job - you might not be able to keep up the payments. Then you could get into serious debt.
You will pay more in the end than you would if you paid cash.
You have to read the small print of any loan or credit agreement very carefully to be sure that you understand what you are agreeing to pay.
It is easy to spend more than you intended.
Before you borrow money, remember these key points:

Try not to buy on impulse because you have seen a special offer or discount. Ask yourself: do I really want it?
Shop around for the best deal. Ask yourself: can I buy it at a lower price, or get cheaper credit from another store, catalogue or lender?
Work out the real cost of buying on credit and check the APR. Ask yourself: what is the cash price and how much extra will it cost me to pay by instalments?
Don't take out a loan for longer than you need it. Ask yourself: how quickly could I pay it off and what is the most I can afford to repay each month?
Check your budget so you know what you really can afford to repay. Ask yourself: if the car needs repairing, or the children need new shoes, will I still be able to keep up the repayments?

Securing a loan
You might be asked to put your home up as security for a loan. Think very carefully before you do this. If your income drops, perhaps because you are laid off or fall ill, you could get behind with your repayments and lose your home.

Don't pay more than you need to
Once you have decided to buy something, there are various ways to pay. For example, should you:

Pay cash?
Borrow by using a scheme offered by the shop or by paying with a credit card?
Take out a loan?
Save up and buy it later?
Before you decide, work out which method will make your money go furthest. Consider all the advantages and disadvantages, or you could end up paying too much.

However you decide to borrow, the APR, or Annual Percentage Rate, is the best way to compare credit deals and get the best one. Lenders have to tell you what the APR is before you sign anything.

Paying cash
The advantages of paying outright with cash are:

You might be able to negotiate a cash discount.
Even without a discount, you will probably end up paying less because you won't have any interest or other charges to pay.
You won't have to worry about keeping up repayments.
The disadvantage is that you have to pay a large amount out all at once, rather than spreading the cost over a longer period.

Getting credit
Credit means that you do not pay for your purchase immediately. Instead you borrow the money for a period of time and you have to pay interest, and perhaps other charges, on what you have borrowed. You can use the APR to compare different lenders' rates. Generally, consumer credit is available as a credit/finance agreement, using a credit card (from a credit card company or a store) or taking out a loan.

Credit/finance agreements If you enter into a credit or finance agreement, you will spread the repayments over a set period of weeks, months or years. You might be asked to pay a deposit and you almost certainly will have to pay more than the cash price, because interest and other charges will be added.

Credit/store cards If you use a credit card or a store card, you will get a statement every month, with all your purchases listed. Often with a credit card you can pay the full amount off within a month or so without paying any interest. Or you can pay a minimum sum every month and carry the balance forward. In this case, you will have to pay interest on the balance outstanding by the date given each month.

If you use credit or store cards and you are not going to clear the balance in the interest-free period, it could be a lot more than you think as interest is added each month. Make sure you compare the APR with other forms of lending.

Taking out a loan You might be able to borrow money so that you can pay for the things you want with cash (or a cheque).

You will have to pay for what you borrow at the interest rate set by the lender. In addition, if you borrow more than the lender agreed, or don't pay it back in the time you agreed, you will probably have to pay extra charges on top of the interest.

Comparing APRs
APR stands for the Annual Percentage Rate of charge. You can use it to compare different credit and loan offers.

All lenders have to tell you what their APR is before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR the better the deal for you, so if you are thinking about borrowing, shop around. Don't forget that sometimes bank loans are cheaper than the credit schemes offered by stores.

If you find a deal with a low APR, ask the following questions:

Do the charges included in the APR vary, or is the rate fixed? If the charges are variable, your repayments could go up or go down. If the rate is fixed, your repayments will stay the same.
Are there any charges that are not included in the APR? This could include something like optional payment protection insurance. If so, make sure you understand what they are and when you would have to pay them.
What are the conditions of the loan or credit and do they suit you? For example, do you have a choice about how and where you make the repayments? If you suddenly have spare money, can you pay the loan off early - without penalties?
Read the agreement carefully. Once you have signed it, you are legally bound by its terms.

Don't forget the sales
If you decide you need an expensive item, could you hang on for a few weeks and try to get it in the seasonal sales, or when the store next offers promotional discounts? You might save some money that way, especially if it meant you could pay cash instead of having to borrow.

It's easy to get carried away
Stores know how to tempt us with special offers, store cards and credit deals. It is very easy to buy something because we are being offered interest-free credit, or a 'buy now, pay nothing for six months' scheme. Sometimes we can even get a discount or a 'free' gift if we sign a credit or loan agreement immediately.

It is a good idea to stand back and think hard before rushing into anything. Ask yourself:

What is the real cost of the item if I buy it with credit?
Is it really the bargain it seemed at first sight?
Can I get the same thing more cheaply somewhere else?
If 'interest free' credit is offered, is the price of the goods higher than elsewhere?
If it looks too good to be true - it usually is.

It is your resposibility to understand all the implications of the contract you are entering into with any lender.