Buying on credit

Buying on credit

 

By Joanna Connolly, head of consumer credit at MSB Solicitors LLP.

 

You may need to buy certain items on credit so that you can spread the payment over a longer period of time. Credit can take the form of interest-free agreements, credit cards, fixed loans or hire purchase agreements.

 

Interest free agreements

 

Not all interest-free agreements are interest free. Normally you can spread payments over a set number of months/years but have to pay the full amount due by a certain date otherwise you may be charged a very high interest rate. Always check the small print.

 

Credit cards

 

With credit cards you make minimum monthly payments of between 2-5% of the balance outstanding. You can pay larger amounts if you want. If you pay your bill in full each month before the due date for purchases, there is normally no interest charged. However beware – if you are even one day late there will be interest and penalty charges payable. Interest rates charged can be raised by credit card companies by them giving 30 days notice.

 
Fixed loans


With fixed loans you borrow a set amount over a specified period. Unless the loan agreement states differently the interest rate and monthly payments cannot be altered.


Hire purchase


Under a hire purchase agreement you make monthly payments, with interest, but you don't own whatever you're buying until the whole amount's paid. There is normally a final payment due at the end. If you don't keep up with payments, the goods can be repossessed. You are also responsible for damage.


If you have paid at least 50% of the payments due, you'll only have to cover any missed payments and damage. The company shouldn't charge for returning the goods. If you have to take them back yourself (which should be stated in the contract), you should only have to travel a "reasonable distance".


The agreement must have a box telling you about cancellation. If you can cancel, you only have five days to act. The best way to send your cancellation is by recorded delivery – keep the slip as proof.


You can pay off your loan early and keep the goods. There are rules on how pay-offs should be calculated, examples of which should be in your agreement. You'll need to contact your lender to find out exact cost.


Unable to afford repayments


If you are unable to afford the loan, hire purchase or credit card repayments then contact the company concerned and ask if they will reduce payments.

 

Be warned that in the event of you not being able to make required payments the creditor will advise the credit reference agencies of missed/reduced payments. After a period of between four and six months, creditors will issue a Default Notice and record it at the credit reference agencies. It will stay on your credit history for a period of six years from the date of the Default Notice. Not all Default Notices issued are valid. It is a good idea to get them checked by the CAB or solicitors.

 

Disclaimer: The views expressed in these articles are the views of the author only. No liability attaches to you for any advice given in the absence of a written retainer. If any issues affect you, you must instruct a solicitor and take appropriate legal advice.

 

Notes
Joanna Connolly is head of consumer credit at well-established Liverpool law firm MSB Solicitors LLP.
She has a particular interest in consumer credit and the enforceability of consumer credit agreements.
In addition to debt and insolvency expertise, MSB represents clients across Britain and internationally.

 

To contact Joanna Connolly directly e-mail joannaconnolly@msbsolicitors.co.uk or call MSB Solicitors on 0151 254 2200