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Store finance debt arrears. How to deal with them.

Store finance is a common way to pay for items and pay back in instalments. This type of credit is often referred to as ‘buy now pay later’ credit.

Interest-free credit is offered by many major high street stores and online retailers and is often available interest free (0% APR) for a fixed time. This means you won’t pay any interest if you pay the loan back in full before this period runs out.

Store finance is regulated by the Consumer Credit Act and most agreements are a type of unsecured personal loan. This means you’re the legal owner of the goods straight away, and the retailer can’t take the goods back if you miss payments.

Before taking out a ‘buy now pay later’ loan it’s important to work out whether you can afford to repay the debt during the interest-free period. Check the terms and conditions of the loan for any early repayment charges and make sure you can afford any interest payments if you can’t pay the loan back during the interest free period.

Weekly payments stores and rent-to-own

Some weekly payment stores such as Brighthouse, Perfect Home or Buy As You View offer a different type of higher-interest finance agreement. For these stores, you don’t own the goods until the last payment is made, and they can take the goods back if you don’t pay.

If you’re not sure what type of finance you have, check the credit agreement you signed with the store. If it says ‘fixed sum loan agreement’ at the top, the goods are yours straight away. If it says ‘hire purchase’ or ‘conditional sale’, the goods belong to the retailer until you’ve made the last payment.

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What happens when the interest-free period ends?

If you don’t pay the loan back during the interest free period, further payments will be needed until you’ve paid the loan. These payments will have interest added to them, which could make the loan unaffordable as the rates are often high, typically 20-30% APR.

What if I can’t afford the loan or fall behind?

If you’re struggling to pay your loan back or miss payments your account will go into arrears. The creditor will contact you to discuss the missing payments and ask you to catch up with the payments.

If you don’t make the repayments the account will default and the creditor can take further action such as passing the debt to a collection agency or taking court action.

If you’ve taken out a’ buy now pay later’ loan and can’t afford to pay it or you’ve fallen behind we can help. Contact us to speak to an advisor or use our online debt advice tool.

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Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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