Worried about taking out a secured personal loan?
The American satirist Mark Twain once quipped that ‘honesty is the best policy… when there's money in it'. Unfortunately little has changed in the past two hundred years and the secured loans industry is no exception. Trading Standards and the Financial Ombudsman Service have driven most of the cowboys out of town, but there are still some questionable brokers about. Take the following five-steps for increased peace of mind:
1. Make sure your broker is regulated. It might be the most logical first step, but you'll be surprised at how many people fail to check their broker's accreditation. All responsible brokers will be regulated by both FISA and the FSA. If they aren't; find another broker. It's also worth visiting the Financial Ombudsman's website to see if there are any complaints registered against the company in question.
2. Is your broker really independent? Some brokers are little more than shop windows for one or two lenders. Ask your broker how many lenders they work with. If the answer is less than five; the chances are that they won't be in a position to get you the best deal. It's also worth bearing in mind that some brokers are more driven by sales bonuses; than your individual interests.
3. Does the loan rate sound too good to be true? If so; there's probably a catch. One of the least desirable practices in the loan business is when underwriters promise clients the best rate over the phone, when they know that they won't qualify for it. The idea is to get hold of the customer's completed application form and payslips before dropping the bomb. Once the company has the client's documentation; it's much more hassle for them to go elsewhere.
4. Have you read the small print? Everybody knows that it's essential to go through the loan agreement with a fine toothcomb before signing, but you really need to be watchful from the word go. Before making any telephone enquiries; check whether you're dialling a free phone or local rate number. Some unscrupulous ‘brokers' earn a good share of their revenue from charging premium rates and keeping potential customers on the line for as long as possible.
5. Take your time. If you're taking out a loan of £25,000 or less; your broker must allow a ‘cooling off period' of 16 days from when they send the documents. During this period they aren't allowed to initiate any form of contact (of course you can); or they will fall foul of the Consumer Credit Act. Avoid any brokers who attempt such strong-arm tactics.
