Borrowers are being warned about a popular credit marketing technique that may not be as appealing as it seems.
Many homeowner loan and credit providers choose holiday seasons to mail out unsolicited cheques alongside material designed to encourage spending.
A closer look at the terms and conditions makes them less appealing when you compare loans, however, and the cheques never provide the best rate.
As well as a two per cent handling fee, many providers will charge well over 20 per cent interest.
Nor do they include the usual 56-day interest free period typically provided with credit, or allow any form of early repayment.
And crucially, the cheques are not covered by the same consumer credit protection as credit cards; if you purchase goods or services not up to the advertised standards you will be unable to involve your lender when seeking a refund.
MPs and consumer groups have added their voices to the warnings issued to borrowers over the cheques, with the Treasury Select Committee warning that they “trip people up”.
“The danger is that these cheques – pushed without any clear advice – are usually treated as a cash advance. Therefore, they attract interest from the day they are used,” Which? spokeswoman Emma Bandey told the Independent.
“Consumers should be able to choose to opt in to receive them – and not opt out, as is the current situation,” she added.
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