The bad deals in the world of finance
The world of finance has a host of different products and offers out there to entice the general public to want them. Some are very good value, some are very useful but there are always a few bad grapes in the bunch. So here is a short guide on the bad deals in finance - the ones to avoid.
- Store cards
- Small loans
- Current Accounts that charge
- Payment Protection Insurance policies
- Car Finance Deals
- Extended warranty offers
- Travel Agency Insurance
These may seem like loyalty cards but they are really just another credit card, often with huge interest rates. Rates of interest range from 24-30%. In other words - too much. Don't be fooled by the 10% discount they offer you when taking one of these cards out. If you cannot resist, try to pay off the full balance each month to avoid too much interest, or try and get a card which offers a low rate for life or an interest free period on new purchases.
People applying for personal loans below the £7500 mark will find that they pay a much higher rate of interest than with a bigger loan. The main reason for this is to make the loan worthwhile for the lender themselves. Whilst the lender may advertise their loans at low rates such as 6.9% APR, these are described as 'typical loans', whilst this sounds like they offer this rate to most applicants, it is only a small proportion that fit into this category.
Some banks have recently started to charge customers for having a current account. These current account charges are for basic bank accounts. The main culprit seems to be First Direct, who have taken the next step and stopped paying interest out on all current accounts. Whilst many banks now have what are known as 'package accounts' where you chose to pay a monthly fee for a selection of discounts and special offers, these are rarely used and are generally not worth the extra money.
PPI is often bundled in with a new loan deal or credit card you are taking out. Whilst they can be a great idea and offer peace of mind in unexpected financial difficulties, they can also be very pricey and bump up your repayment considerably. They definitely seem better value when taken out with a different company than the one your loan is with.
Showroom finance as it is known, is invariably a very expensive type of loan. The best option is actually getting a personal loan to let you buy that showroom car you are after. Many people still take out these car finance deals but the interest you pay can be around 11% rather than the 5-6% you can get with a personal loan.
When buying an electric appliance or something like a 3 piece suite, you are offered the option of an extended warranty. This does provide some peace of mind to the customer but is it really worth it? They can be quite expensive and often aren't needed at all. In fact reports reveal that 81% of washing machines need no repairs within the first 6 years. If so do you really need to pay an extra £100 on an extended warranty for a £200 washing machine?
Just because you book a great deal on your holiday, doesn't mean that extends to your travel insurance either. Travel agencies offer insurance which can be severely inadequate and horrendously overpriced - in some reported cases, over 91% more expensive. Many online insurers can offer great competitive deals, so shop around beforehand.
The best way to avoid rip off deals is to read up on your subject, compare as many deals as possible and always, always read the small print before signing anything.