Familiarizing yourself with the content of the contract before signing it is a basic principle that each of us knows. And yet! Many Poles still have a problem with this. As statistics show, every third Pole only briefly reviews his contract, and every tenth does not read it at all. This may be due to the trust we place in financial institutions, especially in the UK, where most lenders are regulated. However, rightly so? Unfortunately. There are still many scammers who are just waiting to take advantage of our naivety, and therefore in a moment of our inattention we may pay dearly. The best we can do for ourselves is to read understanding contracts and learn to capture all the tricks used by lenders. To make this easier for you, we have prepared for you a list of things that you need to pay attention to before signing a loan agreement in the UK.
Read text in small print and text marked with an asterisk
In small text, lenders usually contain everything they would like to hide from us: interest rates, specific conditions including the duration of the contract, additional fees, etc. Be sure to read this section of the contract. Thanks to this you will avoid unpleasant surprises.
Search and check terms you don’t understand
The text used in contracts is often complicated, incomprehensible and full of unclear terms. If you have any doubts about a given fragment of the text – check it and verify all ambiguities. Awareness of what you decide on when signing a loan agreement is particularly important when it comes to contracts in a foreign language. Don’t be afraid to ask questions or search for answers to your questions on the Internet. In this case, it is definitely better to know too much than to be uninformed.
Check the loan interest rate
Check the APR (Annual Percentage Rate) offered in your loan agreement. IDA in Polish is nothing other than the APRC (Actual Annual Interest Rate). Remember, the lower the APR, the better the offer. Check the interest rate specified in your contract and see if it is favorable for you.
Make sure you know the total cost of the loan
In addition to interest rates, loan agreements may also contain information on additional fees. These may include interest and penalties charged for late repayment of debt and loan insurance costs. Importantly, not all of these costs are mandatory, so if you want to reduce the cost of the loan, talk to the lender about the possibility of resigning, e.g. from the insurance option. The contract may also contain a mention of recovery costs. Even if at the time of signing the contract the risk that you will not be able to repay the loan is negligible, read this part of the contract carefully. Life can be unpredictable and you never know when financial problems may arise. It is important, therefore, that you be aware of all the additional costs associated with paying off the loan.
Check the repayment date
Check the loan repayment date specified in the contract (from when and how it is calculated). Also make sure that the lender gives you the option of changing the repayment date – extending it if you have problems paying back the loan or reducing it if you want to pay back the loan early. Some lenders may charge additional fees for extending or shortening the repayment date, so check your agreement under this account. It is also worth paying attention to the withdrawal notice. By law, each contract should have a period during which you can withdraw from the contract for free without incurring any costs.
See if the lender’s details are complete
Check the lender’s details in the loan agreement. Is the lender registration number given? If so, you can verify that the lender is regulated by FCA using this number. All companies that grant loans in the UK must appear on the regulator’s register. Do you have a problem finding your lender in the database? It should be an alarm signal for you. If the company is registered under a different name than the one the lender is known for, it would be a good idea to check the reviews of both companies on the internet.
Check that all installments are the same size
Some lenders use the baloon payments technique. In practice, baloon payments mean that we pay small monthly installments and then pay a large final installment. The availability of such a loan is unfortunately only apparent. In many cases, borrowers decide on such a loan, encouraged by the prospect of small monthly installments, but fail to pay the last installment. This is a particularly risky way of repayment, especially with secured loans, where in the absence of the payment of the last installment, the lenders can claim our property.
Do not rush!
It is true that this advice does not apply to legal tips alone, but it is equally important. Give yourself time to read the contract and don’t be in a hurry. Some may want to put pressure on you trying to get you to sign a contract quickly. It is important, however, that you have time to read the document. Thanks to this you will be sure that you will not miss anything and you are aware of all the costs and terms of the contract.
When it comes to finances, it’s better to know too much than too little. Cheap loans in the UK are possible, but it is worth remembering that the cost of the loan is not only the rate that we see in the lender’s offer, but also additional costs that may be imposed on us. However, there is an easy way that you can protect yourself against them: Read contracts and return contracts to all legal tips. Thanks to our advice you will know what to look for, so nothing will be able to surprise you. You can find out more about what to watch for when signing a UK loan agreement on the Money Advice Service website.