When we borrow money or sign up to a credit deal, the lender must provide us with a written disclosure statement. This outlines what the loan will cost, including repayments, interest and any fees. It also explains what happens if we can't make payments, or want to make early repayments, and our rights in cancelling the credit contract.
Here are a few quick tips if you're thinking about entering into a credit contract:
Unless it states otherwise, assume there’s a cost for everything! Lenders may charge fees to set up a loan, carry out credit checks, and even admin fees. Check the details carefully before signing.
Fees are the number one reason people get into more debt or miss repayments - and late payment fees just keep snowballing, making it even harder to keep up with a loan.
If in any doubt at all about fees, just ask!
‘Preapproval’ is often just a marketing ploy. We can negotiate the amount and terms for a loan – there's no obligation to accept the advertised offer.
For example, the establishment fee for a loan may be negotiable.
Don't be afraid to negotiate! It never hurts to ask and the worst you can hear is 'no'.
Insurance and extended warranties are optional extras. Payment protection insurance (to ensure loan repayments are made if we lose our job or suffer illness or injury) is not required. Extended warranties are agreements in which the lender agrees to fix or replace defective products beyond the normal warranty period - however in most cases the standard Consumer Guarantees Act already covers this.
Check the details of any insurance or warranty to make sure it’s worthwhile for your situation - and not just a waste of money.
By law, there is a "cooling-off" period of five working days after we receive the written disclosure statement. During this time we can cancel the credit contract for any reason, although we may still be liable for some fees.
If by then we have already taken the goods bought on credit, we still need to pay the full price for the items within 15 working days. Cancelling a credit contract only cancels the financing part of the credit deal - the sale still stands.
The only exception is if the lender has not made full and correct disclosures - in which case we can cancel the credit contract and return the products at the same time.
You can change your mind about a credit deal within five working days of receiving the key disclosure information.