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Your Finance questions answeredFAQ's on loans and remortgagesAll information on this page is Crown Copyright 1997-2000 courtesy of Office of Fair Trading except where indicated otherwise I have a bad credit record. Can I still get a mortgage or loan? - Secured or Unsecured loans? - Credit Checking - How to improve your Credit Rating - Cancelling a credit agreement - Credit brokers' fees - Buying on Credit - Withdrawing from an agreement - Extra protection when using credit - Settling up early - Getting out of debt I have a bad credit record. Can I still get a mortgage or loan? Generally...Yes.....The terms you are offered, however, will vary according to how big a risk you appear to be. If you have CCJ's, Defaults or Mortgage arrears, you can expect to pay a higher rate of interest. The vast majority of lenders use one of two major credit checking companies. These companies hold information on more or less the whole adult population of Britain so if you, or someone at your address has defaulted, got a county court judgement or otherwise had financial problems, then it's going to be on record. This record is searched every time you apply for a loan, H.P., store credit or any other form of borrowing so your history affects the terms you are offered or whether you can obtain a loan at all. Getting a loan from High Street banks and Building Societies will generally prove more difficult for a potential borrower who has experienced problems in the past few years, however there are many well established and reputable financial services companies who will offer mortgages based on your present circumstances rather than your history. This 'sub prime loan' area as it's known has become increasingly competitive over the past few years with more and more companies competing for loan business. This is good news for borrowers as it offers a wider choice of loan and APR packages. copyright loansite.co.uk 1999-2007 How to improve your Credit Rating Firstly, DONT get involved with so called 'credit repair' companies - They don't do anything that you can't do yourself. Make sure there is no incorrect information on your file, which is affecting your credit rating. You can check this by applying for a copy of your file as shown below. Make sure you are on the electoral register as lenders use it to confirm your name and address. Ensure that you and other family members always pay your bills on time. Keep balances low on credit cards and other revolving credit. Apply for new credit accounts only as needed. Credit Checking and Credit Files No-one has a right to credit. Before giving you credit, lenders - such as banks, loan companies and shops - want to check whether you are an acceptable risk. To help them do this, they may check with firms called credit reference agencies to get some basic details about you and your credit record. These agencies do not keep blacklists or give any opinion about whether or not you should be given credit. They simply provide information about your credit record. It is the lender who decides whether you are an acceptable risk. To get a copy of your credit record, you can apply to one of the two main agencies either on-line equifax - You can get a copy of your credit record on-line experian - You can get a copy of your credit record on-line Or by post, You'll need to give your full name (and maiden name if appropriate),date of birth, current address, including house number, street name, district, post town and postcode plus any addresses lived at during the last 6 years. Enclose a cheque or Postal Order payable to Equifax for the statutory fee of £2.00 and send your letter to: Credit File Advice Centre PO Box 1140 Bradford BD1 5US or Enclose a cheque or Postal Order payable to Experian for the statutory fee of £2.00 and send your letter to Experian Consumer Help Service PO Box 8000 Nottingham NG1 5GX Many lenders use credit scoring systems which allocate points to various pieces of information given on your application form, such as your age, your occupation and whether you own your home. These points are added together to produce your credit score. This helps the lender predict whether you are an acceptable risk. Different lenders have different systems and pass marks, so you can be turned down by one but accepted by another. Your credit score is not part of the file kept on you by the credit reference agencies. Lenders do not have to tell you exactly why they have turned you down, but they should give an indication of the reason. If you are refused credit you have certain rights. In particular you have the right: to know the name and address of the credit reference agency that the lender contacted for details about you; to see any information held about you by that agency; to correct any inaccurate information. You must act within 28 days of the last time you contacted the lender about the credit deal. The OFT's leaflet No Credit? gives more details about your rights to see your credit record and amend it. The Data Protection Registrar may also be able to intervene in a dispute with a credit reference agency.Secured Loan A secured loan is secured on your property by the lender. This means that the lender is minimising the risk of losing any money and so can offer a secured loan at a lower APR (Annual Percentage Rate) than an unsecured loan. A Secured Loan is also easier to obtain as adverse credit history such as arrears or county court judgements can be discounted to an extent. In the case of a good credit history, many lenders will offer secured loans in excess of the equity available in the property. In all cases with secured loans you should be aware that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Unsecured loan An unsecured loan costs more in repayments but does not carry the risks of a secured loan. If you don't repay it, the lender can't take your house off you. For this reason, it's often difficult to get an unsecured loan if you've had problems in the past with late or missed repayments on a loan or credit card. Buying on Credit Most people at some time will use credit to purchase goods or services, for example, by obtaining a personal loan through a bank or building society, hire purchase, or a credit agreement with a trader. Before buying anything on credit you should consider the following points. Work out what the total cost of the loan will be. Shop around for credit: how much will a loan cost to repay each month and for how long? Check also the annual percentage rate of charge (normally referred to as APR). Generally speaking, the lower the APR the better the deal. Some traders offer interest free credit (0%APR) but you will need to take care that you are not paying higher amounts in other ways; for example, it may be a higher cash price than you would pay for the same goods elsewhere. Make absolutely sure you have read and understood all credit agreements before signing them. If there is anything you do not understand, ask. Make sure you can afford to pay back the loan and the interest - and still have enough to cover all your other commitments. Check whether the loan has a variable rate of interest. If it has, your repayments can go up as well as down. Make sure you can really afford it. Some loans are only given if they are secured on your home. These are not available if you rent. A secured loan gives security to the lender, not to you. If you cannot keep up with the repayments the lender can sell your home to cover any loss. You might get a lower rate of interest with a secured loan but you could have a lot at stake. You have a short time in which to change your mind if all the following points apply. You signed the credit agreement after discussing the deal face to face with the trader. You signed away from the contractor's or lender's premises. The amount of credit is between £50 and £25,000 and is not secured on your property. When you sign, you should be given a copy of the credit agreement, which sets out your cancellation rights. You should also receive, by post, a second copy or a notice of your cancellation rights. You cannot normally use these rights to cancel purchases made with a credit card because you will have entered the agreement for the card some time ago. You can withdraw from any agreement before it has been signed by both you and the lender. This means acting quickly. If you have already signed, you will have to let the lender know that you have changed your mind before they sign. It's probably best to phone, fax or e-mail and then confirm by post. The effects of withdrawing are the same as cancelling. This is particularly important with agreements secured on your home where the lender must send you an advance copy of the agreement at least seven days before sending the actual agreement to be signed. The lender must not contact you during this consideration period to give you time to think about the deal (but you can contact them). If you use a broker to get a loan, including a mortgage or a loan secured on your home, you will probably be charged a fee for the service. Make sure you know what this will be before you commit yourself. If, however, you do not enter into a loan agreement within six months of being introduced to a possible lender, the broker can only charge a fee or commission of £3 and if you have already paid more you can recover the excess. Similarly, other fees, such as a survey fee paid to the credit broker in connection with a loan that you do not eventually take up, are also refundable if you are borrowing £25,000 or less. Extra protection when using credit Buying on credit does give you some extra rights, for example, if goods are faulty. If a trader has an arrangement with a finance or credit card company to allow you to pay by credit, you have extra protection. This applies if the goods cost more than £100. The credit company is equally liable for a breach of contract or misrepresentation by the trader. For example, if the goods are not delivered or are not what you ordered, or a holiday was wrongly described or you did not get what you paid for, you may be able to claim from the credit card or finance company. It is sensible to approach the trader first. You can, however, make a claim against the credit card issuer or finance company without going to the supplier first. You do not have these rights if you pay with a debit card (where the money is taken out of your account immediately) or a charge card (where you must pay all you owe within a few weeks of receiving the account). This area of law can be interpreted in a number of ways. You may wish to seek advice from a Citizens Advice Bureau or a Trading Standards Department before you proceed. You may find that part way through repaying your loan, you have enough money to pay off the whole amount owing in one go. If so, you could be entitled to a rebate of some of the charges you would have paid over the rest of the life of the loan. It depends on the type of agreement you have with the lender. It can sometimes cost more than you expect to settle up early and in a few cases you could still have to pay more than the original amount borrowed. Even so, settling early will cost less than carrying on with the repayments plus interest for the full length of the loan. Who is responsible for the repayment of a business loan? The responsibility for the repayment of a business loan depends on the legal structure of your company. If you are a sole trader you have the responsibility and potential liability. If your company is a partnership then all of the partners involved are jointly and individually responsible for any loan. In a legal company the directors may be liable if the loan is not repaid. The sooner you face any debt problem, the easier it will be to solve it. Don't ignore it and hope it will go away. If you do, you could end up in court, lose the goods you've bought or find it difficult to get credit in future. You might even lose your home. Even if you aren't up to your neck in debt, it's suprising how quickly it can build up and how long it takes to pay back. Work out exactly how much you owe, who you owe it to and what you can pay back. This will help sort things out in your mind, and help your creditors to see where you stand. Contact the creditor(s) as soon as possible to explain the problem and try to come to some agreement about repayments. Your debt won't be written off but you might be able to pay it back in smaller payments over a longer period of time. This will probably cost you more in interest payments in the long term but may be more manageable now. Follow a five point action plan: How much do you owe? List your debts. Work out when payments fall. Identify the priority debts. How much do you earn? Work out how much money you have coming in. Are you claiming all the benefits you are entitled to? Are you paying too much tax? What do you spend? List your essential and less essential spending. Compare it with your incomings. What do you have left over to offer to creditors? Nothing left over? Are there any areas in which you can cut down your spending? Is there any way in which you could earn extra money? Talk to your creditors. Send them a financial statement showing your income and outgoings. Explain your offer to pay off your debt. |
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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