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Shop around for credit – treat it as you would any big buy says OFT

Pop star Kym Marsh launches OFT campaign

191/04     25 November 2004    

With new research from the OFT showing the importance of shopping around for credit to find the right deal, the OFT is launching a new campaign encouraging consumers to treat credit as they would treat other major purchases.

Kym Marsh, pop star and West End actress, has lent her support to the campaign, aimed at young adults, which sets out 10 key questions for consumers to ask themselves before signing up for credit.

See our campaign pages for consumer information about credit.

An OFT survey found that a third of people had arranged a credit deal without comparing with other deals and over a third of 18-24 year olds had taken out credit while shopping which they hadn't intended to before setting out.

The 10 questions to ask are:

• How much will the credit cost you compared with other similar deals?
• Is your home being used as security?
• Is it the best deal and interest rate you can get?
• Do you fully understand the credit agreement form you are about to sign?
• Will the interest rate stay the same?
• Are there extra charges if you repay the debt early?
• What happens if you miss a payment?
• What do you have to pay each month and for how long?
• What's the total amount that you will pay back?
• Can you take the credit agreement away to consider at your leisure?

John Vickers, OFT Chairman, said:

'By asking themselves our key questions, people will be able to make a more informed decision on what credit deal best suits them. Credit is not an add-on to a major purchase, it is a major purchase on its own – and a wrong decision can lead to long term grief.'

As part of the campaign the OFT has produced a leaflet and a handy pocket card showing the 10 questions, explaining what APR is and setting out sources for further information.  Both are available, free of charge, from 0800 389 3158.

The OFT has also produced a loan ready reckoner that can help calculate how much borrowing at different rates of interest can cost. There will also be a nationwide advertising campaign.

Other key findings from the OFT survey include:

• one in five people have signed a credit agreement they later regretted
• just under a third of people felt pressurised to take up credit
• a majority of people said that they do not always read all of the small print before signing.

NOTES

1. The OFT research was conducted using the BMRB telephone omnibus survey. The sample for the research comprised a nationally representative sample of the general public in Great Britain. A total of 947 adults aged over 18 were interviewed on the telephone between 29-31 October 2004.

Download OFT credit survey (pdf 80 kb)

2. For more information:

Office of Fair Trading - If you use, or are thinking about using, a storecard the OFT has produced a pocket guide 'Are you storecard smart?' If you have already borrowed money and are having trouble paying it back call the get the OFT's pocket guide 'In debt? help yourself out'. Both are available free from 0800 389 3158.

Financial Services Authority - For the pros and cons of different ways of borrowing visit the FSA website 

Citizens Advice Bureau - For personal money advice that is free,
confidential and impartial you can go to your local Citizens Advice Bureau. Look them up in your local telephone directory, or at www.adviceguide.org.uk

Trading standards - Your local trading standards might also be
able to help you. Find their details in your telephone directory or go to www.tradingstandards.gov.uk and type in your postcode.

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