Borrowing Case History

A twenty-year-old shop assistant living with her parents was earning under £400 per week. In under a year she ran up debts of nearly £4,000 with three e-mail order firms, two banks and a credit card company. She decided to borrow part of that sum from a finance company to help pay off her existing debts, but at an APR of well over 300 per cent she was clearly making her problems worse.

In the end she went to her local Citizens Advice Bureau, who took up her case with the local Trading Standards Office. They advised that the APR set by the finance house wasn't likely to be considered extortionate by the courts, given the girl's financial status and the fact that the loan was unsecured. The CAB asked her creditors to let her pay off her debts in small instalments, and all but the finance company agreed. She did eventually pay off the debt but wished she had gone to the CAB earlier.

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Changing Your Mind

If you sign the agreement for a regulated loan at the lender's offices or in the shop where you're buying goods or services, you can't change your mind and subsequently back out of the deal.

But if you sign elsewhere - say, you take the agreement home to study, or it's posted to you, or an agent brings it to your home - you have a 'cooling-off period in which you do have a chance to change your mind. When you're sent the second copy of the agreement it must be accompanied by a separate note telling you about your right to cancel. You have five days, starting with the day after you received... see: Changing Your Mind

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