Borrowing Money: Credit

NI Direct

Many people use credit to buy expensive items such as furniture or cars. There are different types of credit available. However, borrowing can be expensive. Make sure you do your research before you sign a credit agreement.

Paying by credit card

Paying by credit card for a single item costing over £100 but under £30,000 can give you extra protection if you have a problem later.

Whether you use your credit card to pay the full amount or just a deposit, the credit card company is legally bound to help with faulty goods or non-delivery if the retailer goes out of business. You can avoid interest charges by paying your credit card bill in full when it arrives.

Credit agreements

When you buy something on credit, the law says that you must receive a copy of your credit agreement. Be careful with credit agreements:

  • do not sign a blank form
  • strike through blank sections

With most credit agreements you own the goods from the outset. If you don't make the repayments you can be sued for the amount still owing.

Right to withdrawal

You have a right to withdraw from a credit agreement, within 14 days, without giving a reason. When the 14 day period begins will depend on when the agreement is signed. The agreement must explain your withdrawal rights. On withdrawal you must repay the money you received and any interest accrued.

Using your credit card online

You may not be covered if you use your credit card to make payments to a company which only processes payments but doesn’t sell you any goods or services.  

Many websites use online payment processors to take payments. Companies such as Paypal, Worldpay or Google Checkout don’t sell you the goods or services. Your consumer rights may not be protected with these companies. Online payment processors have their own refund systems, so make sure you read their terms and conditions.

Credit reference agencies

You don't have a right to credit. Before giving you credit, lenders want to check whether you're an acceptable risk. A lender may check your credit history with a credit reference agency (CRA) such as ExperianEquifax or Callcredit. They have information about your credit record.

You are entitled to:

  • see a copy of any credit information they hold on you
  • put right anything that you can prove is wrong

To see your credit file, you need to ask for it in writing and send it (with £2.00)to the CRA. Asking for it by telephone or online may cost more.

The CRA is breaking the law if it fails to change files. For more information on your rights to information held by CRAs contact Information Commissioner's Office (ICO)

Credit unions

To borrow from a credit union you must be:

  • a member
  • a regular saver over a set period proving that you can afford the repayments

A credit union is another way to get credit. The interest rate is usually lower than that used by other lenders. To find out more about what credit unions can offer, visit the following nidirect pages.

Hire purchase agreement

A hire purchase agreement is a credit agreement. Under this type of agreement you don’t own the goods until you have made the final payment. If you don't keep up the repayments, the goods will be seized.

You cannot end a hire purchase agreement unless you've made all your payments. You will have to pay at least half of the total hire purchase price. You cannot legally sell the goods until the agreement has been paid off.

Complaining about goods you’re buying on credit

If the goods which you're buying with credit are faulty, you shouldn’t stop payments. You could be breaking your credit agreement and incur other costs, such as penalty charges, if you stop paying.

Speak to the store manager as soon as you discover a fault and tell the finance company about the problem.

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