Buying on credit
Friday, November 25th, 2016
While it is better to avoid buying on credit, there are times when it is necessary. So if you have to borrow money, there are a number of things you need to know:
1. Whatever type of loan you need, shopping around for the lowest interest rate and best terms is essential. Lenders have to make their standard form contract terms and costs of borrowing available to the public for each type of loan. A personal loan from a bank, credit union or building society or a revolving credit on a mortgage could be the cheapest options available.
2. Before taking out a loan of any kind, it is vital to ensure that you will be able to afford the repayments and have some money left over for emergencies. Otherwise you risk being hit with penalty charges, not to mention damaging your credit rating and therefore your chances of getting credit in the future. Generally the longer you borrow money for, the more you pay in interest.
3. If your home or possessions are used as security, and you don't keep up the repayments, then you could lose them. A lender could sell the items you use as security to get their money back.
4. If a lender wants you to take out insurance, you need to consider whether this is necessary or not. You need to ensure that the lender does not add very high insurance and other charges onto your loan.
5. If there is anything in the contract you don't understand, then make sure you get advice from someone you trust. You could consider approaching organisations such as the Citizens Advice Bureau or Community Law Centre.
6. Make sure that the lender is registered with the Financial Service Providers Register, by clicking here. This can help if you have a complaint about your dealings with the lender.
7. If you change your mind, you have a 3-day cooling off period. This means that you have three working days to cancel the contract, after receiving the disclosure statement. If you want to do this, make sure that you state in writing that you want to cancel the contract.
8. It could be unwise to act as a guarantor, for a loan taken out by someone else. If the borrower defaults on the loan, your home or assets could be sold to repay the loan.