Loans – our advice on what to avoid
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20 February 2018

Loans – Our Advice on What To Avoid

Loans – our advice on what to avoid

Loans come in all shapes and sizes, from long-term commitments such as mortgages, to those, which people seek out as what they think will be a quick fix when short of cash.

As with all important financial decisions, they shouldn’t be made lightly and without a full understanding of the agreement, however it can be difficult to know what criteria to look out for, and what to avoid at all costs.

To help give you some guidance, whether you’re about to buy your first home, or are struggling with a Payday Loan repayment which you think you could have been mis-sold, we’ve shared some top line advice.

 

PAYDAY LOANS

Make sure you’re up to speed on payday loans before making a commitment as interest rates on repayments can often be very high. As an example, the average annual percentage interest rate (APR) of a credit card is usually around 22%, for payday loans it can be 1,500%, sometimes more. This means you should be certain that you could pay back the loan and added interest on time before you go ahead.

They are typically short-term loans designed to tide people over until their next payday. The money is paid directly into your bank account, which you would then pay back. Some lenders will allow you to choose your repayment period.

Have you had or are currently repaying a payday loan, which you think you may have been mis-sold? According to the Consumer Credit Act it is possible to claim your money back if it is proven to have been mis-sold to you, if the lender felt it was unaffordable to repay under certain circumstances. We have a dedicated team that can help you to win your case.

Not sure if this applies to you? Unaffordable loans can be determined by:

  • Fees or charges due to the loans (pre-existing accounts: e.g. bank accounts)
  • Unable to pay bills
  • Reliance on payday loans
  • Rolling loans over from month to month
  • Using more than one lender
  • Getting 1 loan or more every month

As these are all checks that the payday lender should go through, a failure to do so can open the door for you to claim your money back, so contact us here.

MORTGAGES

A mortgage is a large loan lent at interest usually from a bank or building society, in exchange for taking title of the debtor’s property. Allowing house purchases, they are paid off over the course of many years.

The lender charges an interest on the sum borrowed and an initial deposit is required as collateral which differs depending on the lender and amount. The loan interest rate will then depend on the size of your deposit, in addition to the length of the loan. The more money you put down for a deposit, the less risk the lender has to undertake, making the interest rate lower. If payments are not made on time, the lender has a right to repossess the house.

When looking into the best type of mortgage for you, it’s important to calculate what you could comfortably commit to paying each month. Once you have an idea of this and know the value of the property you’re hoping to purchase, arranging advisory appointments with lenders can be a good way to explore the different options available.

 

CREDIT CARD OR STORE CARD LOANS

Credit cards or store cards count as loans as you are effectively borrowing money at the point of purchase, with interest charged on top of the purchase price.

While it is not advised to spend what you can’t afford on credit and store cards, accumulating debt, credit cards do offer protection on purchases. If you make a purchase between £100 and £30k in value and something goes wrong, you will be entitled to a full refund from the card issuer. This can come in handy when investing in items like a holiday or new sofa for example.

If you do decide to get a credit card, look for one with a long interest-free period, which can help you to pay off the balance before interest charges apply. A lot of credit cards come with incentives for paying off the balance in full each month too, including cash back.

Although they do have their uses, be mindful that having a credit or store card can lead to temptation to spend money that you don’t have, and failure to make repayments on time will negatively impact your credit score, which can make applying for other loans such as mortgages much more difficult in the future.

If you’ve ever had a credit or store card in the past, you may not be aware that you were mis-sold payment protection insurance (PPI). With limited information, we can look into this for you to see whether you are owed money back. Get in touch with our claims experts here but act fast, as a deadline of 29th August 2019 has been set against making a PPI claim.

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