Guest Article: “When Is a Good Deal Not Such a Good Deal?” by Chrissy Hoey

Guest Article: “When Is a Good Deal Not Such a Good Deal?” by Chrissy Hoey:from Sales and Sales Management Blog by Paul McCord

After several years of a poor economy many sellers are finding themselves with deminished credit and struggling to manage their credit.  I’m diverting from the norm and will post the occasional article designed to give some constructive information on how to deal with the situation.

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When Is A Good Deal Not Such A Good Deal?
by Chrissy Hoey

When every penny counts it can be a big decision to take out a new loan or credit card. And it’s not a good idea to simply apply and work out whether you can afford it afterwards, as every application leaves a mark on your credit record.

Therefore, having calculated how much you can afford and checking whether you can afford the repayments, based on the advertised rate, it can sometimes come as a bit of a shock to discover that borrowing money will cost more than you anticipated.

Unfortunately, this is a common scenario. Banks and credit card providers advertise their ‘best’ rate in order to seduce cash-strapped individuals into applying for their product rather than a competitor’s. However, they do not have to offer you the rate they advertise; in fact only a small percentage of customers will qualify.

A poor credit rating could cost you more

What many potential customers don’t realize is that lenders reserve the right to charge you a higher rate if they do not believe you represent a fair risk. In other words, if you don’t have a tip-top credit rating, expect to be charged far more than the advertised rate – if you are lucky enough to be accepted.

But not everyone who applies for a credit card or loan realizes that they will not be receiving the same preferential rate of interest as they saw advertised…and this can very quickly lead to debt problems. If you are accepted for a loan, it is therefore essential to check that you have been given the same rate of interest that was advertised and if not, ensure you understand how much it will cost.

But it isn’t just sky high charges that can cause financial difficulties for those with a less than perfect credit record.

It can be absolutely disheartening applying for loans and credit cards, only to be rejected, because of cash-flow problems that you may have experienced in the past. And very often, obtaining any type of loan can seem like an uphill struggle, with a series of embarrassing rejections.

And it is exactly this situation which can lead individuals to firms who promise to provide a ‘guaranteed’ loan in return for payment of an ‘administration’ or ‘arrangement’ fee upfront.

Whilst being asked for a payment in advance may ring warning bells, being promised a loan by a well-known company in return for payment for their work can sound like a fair exchange. However, in some cases, the loan has never materialized…and the money is not refunded.

The Office of Fair Trading and the Insolvency Service in the UK have both been involved in investigations with separate firms over the practice of charging consumers a fee for loans which have not been arranged, despite giving assurances that the money has been agreed.

Yes Loans was shut down a couple of months ago following an OFT investigation and can no longer broker new loans for customers. The company has confirmed it will not be appealing against the decision.

Although it is not a quick solution, the best way to escape sub-prime lenders is to improve your credit file – and that sometimes means making things worse before they get better.

Get help with managing debts without taking out additional credit

If you are struggling with unsecured debts which you don’t have enough money to pay, it might be worth seeking help from a professional debt firm.

They could help you arrange an affordable repayment plan with your creditors so that you can work towards clearing your debts at a rate you can afford.

In many cases, taking out additional credit to sort out your debt problems isn’t a great idea and could lead you deeper into debt. By facing your financial problems now, you could find a solution that will help you back onto the path towards financial freedom.

Working with an experienced and reputable company to help you analyze and manage your credit and debt might be necessary, and even if you are confident you can do it yourself, having an expert help guide is always a wise choice.

Chrissy Hoey is with Baines and Ernst, a UK debt management company.