Store finance is a popular means to purchase items and repay it through instalments. This type of credit is commonly known as ‘buy now pay later’ scheme. BNPL credit boom in popularity in recent years because of the available provider such as Klarna and Clearpay.
Additionally, several high street stores and retail shops offer interest-free credit within a fixed period. This means you won’t be paying interest once you repay the entire debt before its due or before the period ends.
Store finance is under the Consumer Credit Act; thus, most agreements are treated as a type of unsecured personal loan. This means, once you’ve obtained the goods, you are by legality the owner and it can’t be repossessed if you miss payments.
Moreover, before considering a BNPL loan, you have to determine if you can afford to repay within the interest-free period. If not, it can rip your pocket as there may be repayments charges when the period ends. You should check the terms and conditions of the loan to ensure you won’t be paying more.
Store Cards Persistent Debt
If you’re making minimum payments for the past 18 months, your account will be on persistent debt. Your store card provider will send you a letter informing you about this. They may also request to pay higher than what you’re usually paying for the past 18 months to avoid being on persistent debt. Find out more by reading our guide on: Store Card Debt: Advice and Help if in Debt or Arrears
Weekly Payments Stores and Rent-to-Own
Weekly payment stores offers a distinct type of higher-interest finance. Though these stores allows you to take the goods and pay it at a later time, you do not own the goods unless you’ve fully pay for it. This means that these stores can take back the goods from you. Some of these stores are:
- Perfect Home
- Buy As You View
If you are not certain with your finance agreement, you need to check the credit agreement that you’ve signed up for. If it indicates ‘fixed sum loan agreement’, you own the goods outright. Conversely, it is states ‘hire purchase’ or ‘conditional sale’, the goods belong to the retails unless you have completely pay for it.
What happens when the interest-free period is over?
If you ignore repaying the loan within the interest-free period, you still need to pay the full amount right after. However, this will have interest charges added on top of your loan. This will make the loan expensive due to higher interest rates that could be around 20-30% APR.
What if I can’t pay the loan or fall behind payments?
If you’re coping to repay your loan or slip instalments your account will be in arrears. The lender will reach you to collect the lacking payments and urge you to keep your payments up to date.
Your account will default if you don’t make any payments and the lender can consider further steps to recover the debt. This can include forwarding your debt to a debt collection agency or using court action.
If you’ve considered a’ buy now pay later’ loan and can’t manage to handle it, or you’ve sunk behind your payments, we can help. Contact us and speak with our debt advisor or our debt advice tool for free.