(c) Copyright 2002 Welsh Consumer Council: www.consumereducation.org.uk
Related Information:
Getting credit
Consumer Credit Act
How to shop around for credit
Credit Concerns
What is credit?
Buying on Credit means having something now and paying for it later. You
can choose the computer you want now and use it while you pay for it. There's
no need to save for months and no need to dip into any savings you might
have.
Remember........ using credit involves borrowing
someone else's money and it can be expensive. You will usually end up paying
back more than you borrow as the lender will probably charge interest.
The lender is in business and aims to make a profit.
It pays to shop around and the same principle applies to credit deals.
Some are much more expensive than others because different companies charge
different interest rates. Look out for the letters 'APR', usually followed
by a percentage (%) e.g. 'APR 20%'. You'll see them on lots of advertisements
for credit in newspapers, shop windows and leaflets. Where the period of
the loan is the same, the lower the 'APR' the better the deal.
Buying on credit can be very costly, so you must think very carefully
before you commit yourself and not just hope you'll be able to afford the
repayments. Do your sums and try to make sure that you will. Think about
what would happen if you suddenly had to cope with a drop in income such
as losing your job.
Never let yourself be pressurised into taking out a credit agreement.
Don't sign any agreement until you've read it and can understand it. If
you are in any doubt, get advice quickly from Trading Standards or Citizen's
Advice (CAB).
Businesses associated with credit:
Credit brokers
* Tries to find you credit, because you find it difficult
to get credit yourself
* You have to pay the broker a fee or commission
which is high
Credit insurers
* It is possible to take out insurance to cover your
credit repayments
* It provides for the repayment of instalments which
you cannot make because of loss of income through unemployment or sickness,
and repayment of the whole debt if you die
* You pay the premium for the insurance policy as
well as repaying the debt
Debt collectors
* They 'buy' bad debts from finance houses for a small
sum and then try to recover the debt themselves
Debt counsellors
* Advise you if you have difficulty in repaying debts
* They charge a fee for this
* They may give you advice or negotiate on your
behalf with creditors e.g. to get the repayment period extended
Related Information:
Getting credit
Consumer Credit Act
How to shop around for credit
Credit Concerns