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1. Can you afford it?
Before you commit yourself make sure you can really afford the
repayments - don't be talked into borrowing more than you want
to. 2. Shop
around for credit. The first thing you're offered may not be
the best deal. There are many types of credit and numerous rates
on bank loans, credit cards, hire purchase agreements and so on.
Don't pay more than you need to.
3. Read the forms before you
sign. If you don't understand them get help from a trading
standards office or Citizens' Advice Bureau. Once you sign you
can't change your mind - unless you sign at home or at some
other non-business premises.
How much will it
cost?
4. Check exactly how
much you'll pay back including interest and charges, is it
good value?
5. Compare the APRs.
This is the easiest way to compare similar credit products - so
if you're looking at credit cards, for instance, go for the one
with the lowest APR. Usually the lower the APR the less you pay
in interest. Sometimes a low APR is only offered for a short
period.
6. Watch out for
other charges such as broker's or arrangement fees.
7. Look at the length
of the loan not just the monthly payment. The longer the
loan period, the more interest you'll pay back.
8. Watch out for
optional extras. Sometimes payment protection insurance is
included when you haven't asked for it.You don't have to take
this up and it may not cover you if you're self-employed or on a
short term contract.
Be aware
9. If you use your
home as security for a loan and you don't keep up repayments
you could lose it.
10. If you act as a
guarantor for someone else's loan you will have to repay the
debt if they don't.
Use this table to see how much
you will actually pay back (to the nearest pound) when you take
out credit and repay in equal monthly instalments. Find the APR
on the left hand side and follow it across to the number of
years of the loan. For example if you borrow £1000 at an APR of
25% for 5 years you'll pay back £1675 (that's an extra £675 in
interest). |
