Advantages Straightforward; Quick Service
Disadvantages Risked-Based Lending; Difficult to Phone
Any who watch channel 'five' or any of the satellite channels, will know there's a massive number of companies who want to sell you some finance. Whether it be "nice people like Kimberly" [Norton finance] or "Where's ma scooo-ta" [Picture] they're all trying to flog you the same thing - a loan.We're not just talking a little loan to buy a car, or spruce up your garden - they mean a "secured loan", or to remove the marketing-speak; a second mortgage. Basically if you default on this debt they're going to come round and sell you property and place your wife and children in work-house.
While I always thought of these loans were for the sort of people that didn't understand one end of a credit agreement from another, I couldn't shake the nagging feeling in the back of my mind we owed more money than we dared think about.I'd often thought we weren't getting the most out of the monthly pay packets - between the 2 of us we were clearing more money than we ever had before, but we always ended up running into the overdraft - and some months the current accounts never once looked in the black.
So it was at this point I made a rough calculation of the totals of all the credit cards we had between us - and came up with around £20 grand. Ok, it's a lot; but manageable. Then I asked about our other loans which, staggeringly, totalled roughly £45k. That means we owe SIXTY FIVE thousand pounds between us? How the hell did we get here?We'd made a few bum car choice in the past end ended up blowing a lot on deprecation - I had been propping up my business for years on my MasterCard and we live in a nice house full of nice things. Ok we've got a lot to show for it - but our monthly commitments, over and above the mortgage we're coming in around £1,200 a month and that didn't include actually repaying any of the credit card debt. Suddenly both "Kimberly" and the prospect of Dickensian work-house toil looked more attractive.
WHO TO CHOOSE?As I already said there's plenty of choice in this market place, but you need to be a smarter cookie. Ignore the smiling people admiring their new car in the slick adverts and look at the bottom of the screen for a "TYPICAL APR". This lets you make a direct comparison between the companies.
Essentially the APR is a total of the loan, all charges, fees and interest. You then subtract the amount you're borrowing from the total and the divided what's left over the number of years. That gives you a percentage amount, per year over the life of the loan. And if you pay attention to the adverts you'll see APR's range from 6.0% to a not insubstantial 19.9%. So what's a typical APR? Well, we're into the murky field of risk-based lending.RISK BASED LENDING
The trouble with us all being individuals, means we all do things differently. While some people would be atoning for their sins every time they went overdrawn by a penny, other people are happy to ignore those credit card bills for months at a time.Essentially if you are a lender, one person is going to be a better bet than another.
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|Ease of Application|
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