Avoiding credit pitfalls
Offers of instant loans and easy credit are everywhere: they drop through our letterboxes, appear in newspapers, on television and even pop up on the internet.
But how should you spot a fair deal rather than get lumbered with hidden dangers which could end-up costing you dear?
Basically, the devil is so often in the small print.
The finance industry has committed itself to sweeping away jargon and incomprehensible small print.
However most consumers seem to feel that much more needs to be done.
A recent survey conducted by the National Consumer Council found:
* Two-thirds of consumers wanted firms to explain fees and charges in a better way.
* A third of the consumers interviewed admitted that they don't bother to read credit agreements, as they find them 'too complex'.
* What is more, almost half pay more attention to what they are buying than they do to the terms of credit.
But by not paying attention to the fine detail of credit agreements, consumers could be signing up to financial woe and expense.
Record highs:
There are now 61 million credit cards in circulation and we are spending nearly £3,000 every second on our credit cards.
This has sent consumer borrowing soaring to record highs.
However, most consumers use credit to their advantage.
It allows them to buy now and pay later, using credit cards to defer payment for a few weeks and loans for longer-term arrangements.
They have access to reasonable credit deals and, as long as they continue to meet repayments there is usually no problem.
The difficulties arise when an unexpected change in circumstances such as a job loss or illness reduces their ability to pay, and debts begin to mount up.
Extortionate rates:
But there is a substantial minority of consumers - one in five adults - who are systematically denied access to credit from high street banks and building societies.
These financially excluded consumers are often driven to borrow at extortionate rates from 25% to a staggering 360% and are left to deal with their huge debts on their own.
Unfortunately, these consumers are often amongst the poorest in society. It is a puzzling irony that the least able to afford high interest rates end up paying them.
But there are hidden dangers for us all when we sign on the dotted line for credit.
* Do not make your credit choices based only on APRs - some credit providers sell you this idea, but forget to highlight any hidden terms such as charges for late payments or for exceeding your credit limit
* Make sure you read the small print. Some companies put all the key information about rates and charges up front in a table, whilst others hide it away.
* Check any excesses, any exemptions and what exactly is covered when taking out Payment Protection Insurance (PPI). However, big issues which can lead to debt difficulty, such as relationship breakdown are not always included in these policies.
* Be wary when taking out a consolidated loan. Remember that you are paying another lot of interest and, if it is secured on your house, you also risk losing your home if you do not keep up with payments.
The views expressed are solely those of Frances Harrison's and not the BBC's. Any guidance is for general information only and does not constitute financial or legal advice.
Source :- news.bbc.co.uk