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High Interest Debts to Avoid

By: Garry Crystal - Updated: 28 May 2012 | comments*Discuss
High Interest Debts To Avoid

High interest rates are a major factor towards millions of people finding themselves in uncontrollable debt.This type of credit is often easy to obtain as the returns to the lenders can be massive. High interest debts to avoid will include many store cards and lenders who advertise in newspaper adverts.

Why People take High Interest Debts

The sad but true fact regarding credit is that a lot of people who really need it can’t obtain it. It could be down to bad credit scores, financial mismanagement or factors such unemployment and low income. It can be as simple as taking on extra credit for Christmas that may not be repaid until well after the next Christmas has passed.

Estimated figures show that around 2.3 million people in Britain are taking out credit with massive interest repayments. Most of these borrowers are on a low income, and financial stress and the inability to obtain normal interest credit leads to this type of borrowing as a last resort.

Companies to Avoid

It is not hard to find companies providing credit with high interest rates. You can find advertisements in the back of newspapers, by browsing the internet or the advertising during daytime television. The target audiences for these companies are the unemployed, students, part-time workers, and single parents.

The advertising employed by these companies is subtle yet clever. They will make it sound as if one telephone call can solve all of your debt worries and will state that they will help you no matter what the circumstances are. In reality the rates they offer can be as high as 183% APR and many will want you to use your house and car as security. You could borrow a small amount and spend years paying back these high interest loans.

Store Cards

Store cards that give credit to buy their goods will also come with very high interest rates. Compared to normal major credit card rates the APR on these cards will be extremely high. Many of the major high street stores will have their own cards with interest rates usually at around 30%; these are definitely high interest debts to avoid. Some stores will actually entice people by offering goods on credit without obtaining credit checks; again the interest is very high at around 30%. If you can, pay with your own lower APR credit card or simply pay cash.

High Street Lenders

There are well known high street lenders that target members of the public on low income. They will often buy information on their target customers when the person looking for credit has been refused elsewhere. Make no mistake, these companies with their massive interest rates could easily be classed as legal loan sharks. Not only will they charge huge interest rates on very small loan amounts but they will also use call at home collectors to make sure they receive their money every week.

Car Finance Companies

If you are looking to purchase a new or second-hand car and are finding it hard to obtain credit then car finance companies will offer loans. These companies are sometimes a branch of a main loan company and they advertise on daytime television and in the telephone book. Once again they will charge huge interest rates and many have been known to repossess cars after only two missed repayments. On top of the repossession the companies will sue if repayments are not made.

How to spot High Interest Lenders

High interest lenders are unscrupulous in their marketing techniques. They are unashamed regarding their interest rates and see business as business, even though they have been named as one of the major links to child poverty in Britain. Any of the following factors are signs of high interest debts to avoid:

  • Unsolicited mail drops including emails.
  • High interest rates; anything around 29% APR and upwards.
  • Advertising on daytime television or small adverts in newspapers.
  • Door to door collectors for repayments.
  • Most store cards and many home shopping catalogues.
For many people there is a serious lack of alternatives to taking on high interest credit and loans. Financial stress and desperation are the reasons many people turn a blind eye to these massive interest rates. As long as people keep using these companies then the links between poverty and high interest rates will always exist.

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