Credit and Debt - Loans
I have got into a mess with loans and credit cards. I have read about companies that offer to sort your debts out. Should I approach one?
Obviously the choice is entirely yours, however these companies will only deal with your non-priority debts and some of the money you pay to creditors will be used as fees. If you ask the CAB for help our service is totally free. Also we look at your priority payments like rent, mortgage, council tax etc and make sure these are budgeted for before making offers to non-priority creditors.
I am thinking of consolidating all my loans and perhaps re-mortgaging. Would the CAB recommend this course of action?
No, for two reasons. The CAB consumer credit licence does not enable us to give advice about the merits or otherwise of financial products. Secondly, in most cases borrowing to get out of a financial crisis is not sensible.
If however you do decide to go ahead, make sure that the company you use is authorised by the Financial Services Authority (FSA), and satisfy yourself that the advice you are receiving is in your best interests. If someone is recommending a loan or financial product that will earn commission, how independent is their advice? Don't take the first deal offered, shop around and think carefully about the extra financial commitment you are making.
How do I shop around? I find the figures so confusing.
One method of comparison is to look at the annual percentage rate (APR). This should reflect the true cost of the loan. The APR should be clearly stated on the agreement and in all advertising. You should also look at the length of the repayment period. A low APR may not be a better bargain if the credit period is very long.
People keep coming to the door on our estate offering loans. I am often tempted to accept. Should they be doing this?
It is a criminal offence to make unsolicited visits to someone in order to persuade him/her to make a debtor - creditor agreement for a cash loan. It is not an offence to sell goods or trading cheques or vouchers. Some credit providers use this to gain entry so that they can then lawfully offer a cash loan.
If you feel you are being harassed to take out credit you should consider reporting the provider to Trading Standards.
Last updated: February 22, 2007