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Understanding Finance Paperwork
Transcript of Understanding Finance Paperwork
The top line of a finance agreement will always say what type of agreement it is, and how it is regulated. Although this example uses Hire Purchase, which is very well-known, other types such as Fixed Sum Loan Agreements are actually more common.
Almost all types of finance are regulated by the Consumer Credit Act 1974.
It's always really important to know who the agreement is with. The company providing the finance isn't always the same company as the one you are getting the actual item (car, TV or whatever) from. However, legally your rights can often be against the company named here instead of the trader.
It is crucial to know what an APR is, and the APR figures for any finance agreement have to be clearly stated. Here they are in a section with the monthly repayment amounts and the term of the credit.
If you fail to keep up on payments for your agreement, the goods may be repossessed. The rules around this possibility are always included on the paperwork.
This is the final part: once you sign, you are legally bound into this agreement. Again, the text here will re-state what type of agreement it is and how it is regulated.
The total price of the goods - before any additional costs - is stated here.
This section tells you how much credit you've requested and - even more importantly - what the charges are for this credit.
Like with the credit, here is a breakdown of the extra costs: the APR, the repayment term, and the monthly repayment amounts.
Your rights to cancel the agreement are here - make sure you understand them - but they are by necessity quite brief. The Citizens Advice Consumer Service can offer more detailed guidance on these.
This is an example finance agreement, made especially for this exercise. Let's go through it step-by-step and see what it means.
Details of any deposit are here. This can also tell you exactly how much you got as a trade-in on your old car, for example.
Many types of credit will include optional insurances, such as the ones listed here. It is very important you keep an eye on these; they are optional and you may end up agreeing to insurance that you don't need or - worse still - actually are of no use to you. Historically, insurances such as PPI have been subject to mis-selling so if in doubt about them, ask an adviser.