What are you really signing up for?

We know that times can often be hard for customers on low incomes.

It’s not easy keeping on top of your finances if you have several debts spiralling out of control.

And if you have a poor credit history it can be difficult to find affordable borrowing.

But you should shop around before being tempted by an expensive lender such as Provident, or Shopacheck. Here’s why.

The facts

‘APR’ explained
When you take out a loan or other form of borrowing from anybody, attached to the amount you borrow will be ‘APR’. APR stands for ‘Annual Percentage Rate’, and is the percentage of additional interest (and in some cases additional charges) you must pay on top of the amount you borrow. All lenders MUST declare the APR before you agree to borrow or sign anything. The higher the APR, the more you will have to pay back.

Here are some of the loan APR rates of interest from one of the local credit unions as at 24th October 2008. Calculated based on borrowing £500 over 1 year:-

Lender	Amount borrowed	Re-payment term	APR %	Monthly payment	Total payable
Mid Cornwall Credit Union (now Cornish Community Banking) Members with savings	£500	12 months	12.7 %	£44.43	£533.14
Mid Cornwall Credit Union (now Cornish Community Banking) New members with no savings	£500	12 months	26.48 %	£47.21	£566.55

Here are the rates of some common much more expensive lenders for exactly the same loan:-

Lender	Amount borrowed	Re-payment term	APR %	Monthly payment	Total payable
Provident	£500	12 months	183.2%	£70.04	£840.53
Shop-a-check	£500	12 months	246.5%	£76.69	£920.26
Greenwood	£500	12 months	399.7%	£89.68	£1076.21

Watch out for:-

• Arrangement fees and other hidden charges
• ‘Typical APR’ – This means that the rate advertised may not apply to you and you may be charged a higher rate.
• Variable – This means the APR can change, meaning your payments could increase.
• Hidden clauses and charges, check what will happen if you miss a payment.

As the figures show, it is much cheaper to borrow from a Credit Union.
The local credit unions for this area are:-
Cornish Community Banking on 0800 0556873 or visit http://www.mccu.co.uk/
Kerrier & Fal Credit Union on 01209 314449 or visit http://www.kfcu.org.uk/index.html

Borrowing tips:

• NEVER be forced or pressured into borrowing money you don’t really want.
• NEVER agree to borrow from a lender if you are unsure or don’t fully understand what you are getting yourself into.
• DON’T borrow from a lender, just because your friends or family use them. They may also be paying too much interest for the money they have borrowed.
• DO get advice from a local CAB office beforehand if you’re unsure.
• DONT borrow from a lender just because you have borrowed from them before and are friendly with them. They use this relationship with their customers to make their money!

If you have debts which you are struggling to re-pay, or need advice about other financial matters or borrowing, contact Kerrier Citizens Advice Bureau on 08444 994188 or visit www.kerriercab.org.uk