(c) Copyright 2002 Welsh Consumer Council: www.consumereducation.org.uk
Related Information:
What is credit?
Getting Credit
Credit Concerns
Consumer credit act 1974
How to shop around for credit:
Look for and ask about and compare:
* The APR - short for 'Annual Percentage Rate of Charge for Credit'.
It's worked out in a way set down by law taking account of everything you
have to pay to get the credit - interest and any other charges. It also
takes into account when you have to make repayments e.g. weekly, monthly
or whatever. It tells you the real cost of borrowing, worked out as a yearly
percentage e.g. 'APR 20%'. The lower the APR, the agreements of similar
length and amount borrowed, the better the credit deal generally is.
* The cash price of the goods or services.
It's very important to look at this, particularly when you see 'interest
free credit' advertised. With interest free credit, the total amount you
pay back must not be more than the cash price. Check how the cash price
compares to other shops. If it's very high, the 'interest free credit'
may not be such a good bargain.
* Amount of deposit. The less you pay as deposit,
the more cash you will borrow, and pay charges on, increasing the total
you pay in the end.
* The length of time the loan is to run. Could
you still afford it if you had to cope with a drop in income before you'd
made all the repayments? Do not be tempted to have a loan over too long
a period just to keep the monthly repayments lower. If you buy your clothes
on credit you don't want to still be paying for them after they are worn
out or gone out of fashion.
* The amount and frequency of repayments and what
the credit deal will cost. If the APR is relatively low but the cash
price is very high, it's important to look at what the whole deal adds
up to. The APR represents the cost of credit; it doesn't tell you if the
price of the goods is reasonable.
* Whether you have to offer any security for the
credit. If under 18, you'll need your parents or another adult to stand
as guarantor. They promise to pay your debts if you can't. It's a legally
binding promise and it means they can be taken to court if they don't keep
them.
Related Information:
What is credit?
Getting Credit
Credit Concerns
Consumer credit act 1974