Posts Tagged ‘loans’

Negotiating With Creditors for Changes in Terms and Loan and Debt Schedules – 3

September 22, 2008

‘Terms’ covers a multitude of sins. It is really a reference to the small print. Bear in mind that there has been no real negotiation in setting up the loan. There is a take it or leave it view about this.

Among the things that are in the terms are ones about the creditor making changes without your agreement. This probably is in legal gobbledegook and covers almost every condition in the contract. Were I to face the need to argue any of this I would almost certainly look for the force majeure argument to be a major defence.

It really is part of the fair treatment argument, and thee are several areas where I am itching to get public debate started. But this will be after I have produced a good help for all those with debt worries.

In that situation you have almost certainly been charged unreasonably high interest rates. I am putting ‘unreasonably’, but the creditor would obviously argue the opposite. Yet if your rate has been increased and you phone to ask for it to be put down again it is almost certain that there will be some movement in your favour.

Even if you do not have debt worries and your credit rating has not changed it is likely that your interest rate has been increased. Bank of England interest rate has been at or below 5% for months, or longer! I can see a strong case for a rate of 8%, 10% – at a pinch 12%. But tell me if you can how 15%, 18%, 22%, 29% and even 40% can be justified.

With these rates i am making reference only to the big name banks, credit institutions and loan companies. I abhor, but am not here dealing directly with, the Mail Order companies that charge interest at all. as for those which charge a point below 30% and 40% I have no polite words.

And I am not directly talking of the appalling of the outfits like the Money Shop that charge rates northward of 100% p.a.; I have heard there are ‘payday’ loans that work out at up to 600%. For any rate that is above 20% I declare the regulators are asleep at the wheel. Indeed I would want enquiries into any rate that is more than 5% above Bank Rate.

So there are my markers. Interest rates are not simple, and confusion is deliberately employed. It is relatively simple to ensure that complex methods are simply not permitted. I know of no reason for having them.

Be absolutely clear that interest means you pay back to the creditor more than you originally borrowed. The higher the interest rate the more you pay back. In some cases, where the repayment sum is low and the interest rate not low, the debt can continue for ever!

If you do not understand interest rates believe me that a lot of people do not. If you are one you are not alone. Then seek advice. All the charities will be pleased to work out for you how you are placed with your own debt.

So do not accept that you must suffer unreasonable interest rates. You may have to argue it all the way to the Financial Ombudsman Service, but I hope that any creditor guilty of charging unreasonable rates will have their licence revoked, however big they are.

Joseph Harris
Debt Control Man