Freedom Finance Guide to Borrowing

 FINDING YOUR WAY AROUND BORROWING

Welcome to the
Freedom Finance Guide
to Borrowing e-book.
The one stop shop for all
your borrowing queries!
Our aim at Freedom Finance is to present
our customers, and anyone else interested,
with lots of the financial information needed
to make an educated decision about
borrowing. Today’s market place is filled
with conflicting, jargon-fueled ideas about
which way to turn. Many of these seemingly
attractive deals apply only to those with
outstanding credit history and in reality; the
best deal on offer might not be available to
you. With this guide Freedom Finance wants
to present you with all the options.
This e-book, in conjunction with our website
www.freedomfinance.co.uk, is a collection
of all our easy to follow financial guides to
borrowing, complete with a jargon busting
glossary. With this booklet and our soft
credit search, borrowing options have never
been so accessible!

“Everything you wanted to
know about loans and finance,
but were afraid to ask!”
If you still have questions:
Call us on: 0800 432 0142
or from a mobile on: 0161 498 7727
(Monday to Friday 8am–9pm,
Saturday 8am to 6pm)
or
Email us at:
support@freedomfinance.co.uk
This way
Please
Before you get into the detail, first read our
useful ‘financial jargon glossary’, then take a
look at the ‘tips to improve your credit rating’
to get you in to the best financial shape!
Topics Page
Financial jargon glossary 04
Tips to improve your credit rating 06
Balance transfers 08
Borrowing small amounts 10
Choosing a secured loan 12
Information about mortgages 14
Loan application checklist 16
Borrowing with a poor credit history 18
Things to look out for 20
Managing financial difficulties 22
Mortgages v credit cards v loans v overdrafts 24
Shopping for loans online 28
Rejections through bad credit 30
The cost of having bad credit 32

Do you feel intimidated by
the financial jargon thrown
at you? Scared to ask what
the words (that will affect
your borrowing) actually
mean? Look no further than
this financial glossary for all
the terms you will need when
considering a loan. You’ll
perhaps recognise the words
and abbreviations without
fully understanding what
they mean.
APR
This stands for Annual Percentage Rate and is used
to show the total cost of borrowing over a yearly
period. This total is inclusive of costs of borrowing
such as upfront fees and interest rates. This figure
facilitates comparisons across lenders.
CCJ
This stands for County Court Judgement and is
issued by a County Court in response to a failure to
repay a debt. It adversely affects your credit rating
as it shows you to be a less reliable borrower.
As a result, future borrowing may be affected.
Consolidation loan
These loans are taken out by borrowers who have
existing debt. This existing debt is repaid with the
larger ‘consolidation’ loan, which means that there
is just one repayment to make each month. This
enables borrowers to better manage their finances.
If the interest rate is favourable, it could mean that
less money is repaid each month than the sum
of the separate loans.
Credit card
Your lender issues this card so that you can make
purchases on credit. The credit must then be repaid
at the rate the lender specifies on a monthly basis.
A minimum payment must be made each month
and ideally should be paid in full.
01/
A glossary of
financial jargon
4

Credit footprint
A credit footprint is the mark left on your credit
report as a record of your application for credit.
This ‘footprint’ shows the date of the credit check,
the name of the lender to whom you applied,
and the type of credit requested. It does not show
whether or not the application was accepted.
Credit rating
This is a score to measure your creditworthiness
based on your previous credit history. If your
credit report shows that you have always repaid
borrowing on time then your rating will be good, if it
shows missed or late repayments, or that you have
received a CCJ, your rating will be poor.
Defaults
A default notice is issued usually after 3-6 months
of missed payments. A default notice is a formal
letter that if not rectified (arrears paid) will result
in a default being registered on your credit history.
This has a negative impact on your credit rating
and makes future borrowing difficult
Early repayment charge
This charge is incurred when a borrower chooses
to pay off the loan or mortgage, before the agreed
term length has expired to cover the lender’s costs.
Always check with the lender what these charges
are if you think you may want to pay the loan
back early.
Eligibility criteria
This is the list of requirements and/or exclusions that
will determine whether or not a potential borrower
is suitable for a particular type of credit.
Equity
This is the difference between what an asset
(i.e. your property) is worth and what is owed
against that asset (i.e. your mortgage).
Hire Purchase
This method of borrowing is used on big-ticket
purchases such as a fridge freezer or car. It means
that you can take the product at the start and repay
the monies owed each month over a set period.
Mortgage
This is a large loan that is given to those who wish
to purchase a house but cannot afford to make the
payment up front. The loan is secured against the
property so that if the borrower fails to make the
repayments the property could be repossessed.
The lender would only do this as a last resort.
Payday loan
This is a short term borrowing of small amounts
that must be repaid on the next payday. The interest
rates are high because of the short period of time
the loan is taken over
Personal or unsecured loan
A personal or unsecured loan means the lender
relies on the borrower’s promise to pay it back.
Due to the increased risk involved, interest rates
for unsecured loans tend to be higher. Before you
decide to take out this type of loan, check out the
interest rates which are often fixed but can be
variable. Remember, any loans are only as good
as the interest rate. Typically, the balance of the
loan is distributed evenly across a fixed number of
payments; early repayment charges will be applied
if the loan is paid off early. Unsecured loans are
often more expensive and less flexible than secured
loans, but suitable if you want a short term loan
(one to five years).
Repayment holiday
This allows borrowers to postpone repayments for
an agreed time. The cost of the missed repayments
and the interest charged will then be spread across
the remaining payment term following the holiday.
Secured loan
These types of loans are usually larger than
personal loans so for security of repayment, lenders
secure the loan against an asset, usually your
house. Because of this risk to your home should
repayments not be met, the lender may offer
better interest rates. Secured loans are also usually
available across a longer term.
Store card
Similar to a credit card, this allows the borrower to
make purchases on credit to pay for at a later date
but can only be used at a particular chain of shops.

Financial difficulty or
mismanagement in the past
may have damaged your
credit rating, but this can
be improved. This guide
provides you with all the tips
you will need to repair your
credit rating for the future.
02/
Tips to improve
your credit rating
6
The footprint free
‘soft search’ service
This service is a great way
to check whether your credit
rating is good enough for you to
be accepted for a loan without
you taking any risks by making
numerous applications that
could affect your rating.

Take out a credit card
Spend a little on the card
every month making
sure that it is repaid in
FULL the next month. It is
better for you to take out
a few cards and keep the
spending to significantly
below the credit limit than
maximising the amount
on one single card.
Potential lenders do not
like to see current credit
at the maximum limit.
Show your stability
Staying at the same job
or address for a long
period of time shows
the lender that you are
stable. Loyalty to one
bank is also considered
to be beneficial for your
credit score for the same
reason.
Consider your
financial links
If your partner has a poor
credit history, this may
be linked to you through
utility bills, bank accounts
or your mortgage. To
avoid this, try to separate
your credit accounts
and bills.
Stay up to date
Ensure that your credit
reference file is up to
date. This can be checked
through credit reference
agencies such as Equifax,
Experian or Callcredit.
Take out a
phone contract
Whether it is a landline
or mobile phone, a
telephone contract will
help to boost your credit
score so swap that pay
as you go!
Avoid a payment break
Taking a payment holiday
or any other pre-arranged
payment break might
affect your credit score,
although it is advisable
to talk to your creditor
as soon as you begin
to struggle making the
repayments.
Register on the
electoral role
Registering will establish
your identity to lenders
as well as demonstrating
your stability, 3 years of
voting history is a great
way to boost your credit
score.
Keep applications
to a minimum
If you have been declined
for credit, do not reapply
straight away. Instead,
check your credit
reference file to see if
something is on there that
shouldn’t be. Next, use a
soft search tool such as
Freedom Finance.

A balance transfer is where
all or part of your debt is
transferred from one credit
card to another one which
benefits from a reduced
interest rate. Here we look
at the pro’s and con’s
of balance transfer.
Why do it?
A balance transfer can be a great way to
manage your credit. If you have spent on a
particular credit card, and are paying a high
interest on the balance, you can transfer it to
a card that has 0% interest for a set period
of time. If you can manage to repay this
amount within the deal period, then you will
not have to repay any interest at all. If the
deal term passes, you will just pay interest
on the remaining sum. So in effect, you have
received an interest free loan.
03/
A guide to
balance transfers
8
Freedom Finance
offers a footprint free ‘soft
search’ service that is put in
place to protect your credit rating
when searching for a loan.
By entering your specific details you
can obtain a personalised quote from the
lenders that best suit your circumstances
and all without leaving a footprint on your
credit file. A reference mark is only left on
your credit file after you select a product.
This removes the risk of multiple rejections,
which is damaging to the credit history
you are looking to manage with a
balance transfer.

The best deals are usually reserved for
those with an excellent credit score.
A minimum payment MUST be made each
month. Failure to make a minimum payment
can lead to penalty charges or a full interest
charge.
Don’t forget the transfer fee! Although the
interest can be set at 0% for a time, there will
be a fee, usually around 3% of the balance, to
make the transfer. If 3% sounds too high, there
are other cards available which offer a lower
transfer fee but with a reduced 0% interest
period.
Don’t use your balance transfer card to
make purchases! The rates for spending may
be significantly higher than your original card.
You will need to switch the balance within
a couple of months of opening the balance
transfer card to benefit from the advertised
deal, so don’t delay!
It’s not a good idea to keep switching the
card balances, as this will be recorded on
your credit score and may affect it badly.
You can plan the repayment of the debt by
transferring the balance to a 0% interest card
and setting up a direct debit, which divides
the remaining balance between the number
of months that the 0% deal lasts. This means
your debt can be fully repaid at 0% interest.
You can’t balance transfer between the
same banking group, so check who is
affiliated before applying. For example,
NatWest and RBS are members of the same
banking corporation so they would not allow a
balance transfer between the two companies.
If you can’t fully repay the card at the end
of the interest free period, you could try
making one more switch. This will give you
longer to repay the debt at the lower interest;
otherwise the remaining debt will incur interest
that is perhaps higher than what you were
paying on the original card.
If you want to clear the debt in one sum at
the end of the interest free period then you
can do so, but don’t forget to continue to pay
the monthly minimum payments! Failure to do
so will damage your credit rating, regardless
of whether or not you clear the balance at a
later date.
If at the end of the interest free period
you cannot afford to clear the remaining
balance, it may be worth arranging a loan
to cover the required amount. The loan may
provide a cheaper alternative to paying the
high interest rates on the card.
It is advisable to close the card that the
balance has been transferred from.
This is because of the affect more access to
credit will have on your credit score. Closing
the card will also remove the temptation to
use the card again.

Often a small amount of
finance is all that’s required
and you may want to avoid
long term commitments.
It is true that some small loan
amounts come at a higher
cost, but this section will
look at the best options in
obtaining small amounts of
credit. It needn’t be an overly
expensive exercise with just
some simple tips.
Increased overdraft
If you are looking to borrow a small amount,
it is wise to first contact the bank that holds
your current account to request an overdraft
facility. If granted, the fixed amount will be
credited to your account and then repaid.
If you are disciplined, the overdraft can be
repaid fairly quickly.
Overdraft interest rates are usually
charged but there are offers of interest free
arrangements so make an enquiry with
your bank. Make sure you do not exceed
the agreed overdraft limit, as this will incur
an unarranged overdraft charge, and may
damage your credit rating.
Personal or unsecured loan
A personal or unsecured loan is a small
borrowing of a fixed amount, usually
between £500 and £25,000. This is a great
way of borrowing a small amount because it
enables you to budget efficiently, as normally
the monthly repayments stay the same.
04/
A guide to
borrowing
small amounts
10

0% credit card
If you need the credit for purchases, why
not go for a credit card with an interest
free period? Many deals offer interest free
purchases for up to a year, so if you can
repay the debt within this time then the cost
of borrowing will be zero. Be aware of the
interest rates following this period, they may
be substantially higher than a card with no
interest free offer. You may wish to balance
transfer but this activity also shows on your
credit rating, and should not be done often.
Credit unions
These are small organisations set up by their
members offering savings and loans. There
maybe one in your area you can join.
Other ideas
If you need to raise a small amount of cash,
there may be alternatives to borrowing
from the bank. Selling unwanted goods will
raise some funds, or shopping around for
improved deals on your car insurance or
mobile phone may also save you money
each month. Perhaps you could cancel
luxuries such as gym memberships or
nights out until the required amount
of money has been raised.
Don’t forget
Most borrowing, however small, leaves a
footprint on your credit rating so make sure
that you never borrow more than you can
afford to repay. While managing a small loan
well can actually improve your credit, missing
payments or having to extend the term can
cause a fall in credit score.
The Freedom Finance ‘soft
search’ service which is put
in place to protect your credit
rating is perfect for finding out
the best loan option for you.
This innovative tool allows you
to enter your specific details to
obtain a personalised quote from
a range of lenders. It means you
can quickly find the best short
term lending option without
affecting your credit rating with
lots of small applications.

Our current financial climate
has made it very difficult to
borrow money. Some people
are finding it harder to get
finance without any personal
assets, and some banks
prefer to lend to people who
secure their loan against
their property. These secured
loans are also referred to as
homeowner loans or second
charge mortgages.
What is a secured loan?
This is a loan in which the debt is secured
against collateral such as a house. This asset
can then be taken by the lender should the
debtor default on his repayments.
What can I use secured loans for?
As secured loans are available up to as
much as £500,000, recipients often use this
for home improvements for example, to build
a conservatory or extension which should
increase the value of your home. Secured
loans may also be taken out to consolidate
other debts and for larger purchases such
as cars etc.
However, you should not take out a secured
loan on the basis that you can replace it later
with a cheaper alternative. Long term loans
are not designed and should not be used
as bridging loans or to meet other short
term needs.
Will I be eligible for a secured loan
if my credit rating is poor?
With a secured loan, the bank is more likely
to get the money back as if payments are
missed; they have a charge on the house.
05/
A guide to
choosing a
secured loan
12

As a result of this, lenders are, on the whole,
more likely to offer a secured rather than
unsecured loan to customers with a poorer
credit rating.
Can I borrow a higher amount than
I could with an unsecured loan?
Yes. Unsecured lenders usually cap the
borrowing at £25,000 but a secured loan
may be taken for up to £500,000. Secured
loans are typically offered with longer
repayment periods (but as with all loans,
longer repayment periods incur more interest).
A secured loan may be taken for up to 30
years whereas a personal loan is usually
taken out up to 7 years.
Are the interest rates higher
with a secured loan?
They are variable across lenders subject to
lender criteria and personal credit scores. The
length and amount of the secured loan will
also influence the rate, as well as the amount
of equity in your home. Home equity is the
difference between the current value of your
home and the remaining mortgage left to pay.
What are the disadvantages
of secured loan?
The primary risk of a secured loan is that your
house may be repossessed if you fail to keep
up with repayments. Because of this, you
must check if the rates on your secured loan
are variable or fixed. If the rates are variable,
you must consider that they will change with
lender criteria or the economic climate. Don’t
forget to keep this in mind when setting your
monthly budget!
A further disadvantage is that you are likely to
incur an Early Repayment Charge should you
wish to pay the loan off early. Secured loans
are not designed for short term borrowing so
make sure you choose the best product for
your circumstances.
Are there similar alternatives
to secured loans?
Homeowners may wish to release some
equity from their existing home by switching
mortgages. For example, if your home is
worth £400,000 with a mortgage of £300,000
you may wish to move lenders and obtain
a mortgage for £340,000 to pay for home
improvements. You might even save money
by switching to a mortgage with a lower
interest rate.
Another option maybe a further advance from
your existing mortgage provider so always
contact them to see what they can offer before
you shop around.
Many people fall into the trap
of believing because they have
a home they will automatically
qualify for the best rate possible.
This can lead to multiple
rejections from lenders.
Don’t forget even secured loans
are subject to conditions and just
because you have a home doesn’t
mean you will automatically
qualify for a secured loan. Which
is why it makes sense to use
our soft search facility to find
exactly the right loan for your
circumstances without potentially
damaging your credit rating.

Taking out a mortgage
is a big step, and making
the wrong decision about
the most suitable type of
mortgage can be a very
expensive mistake. This
information is designed
to outline the range of
mortgages available
and the differences
between them.
Repayment mortgage
As the name suggests, a repayment
mortgage involves repaying both the capital
(money borrowed) and the interest charged
on the outstanding amount. This amount
is typically more than the interest only
alternative, but at the end of the repayment
mortgage period, the debt will be fully repaid
so there is no need to invest elsewhere.
Interest only mortgage
The monthly payments to an interest only
mortgage covers only the interest and none
of the capital. This means that the amount
borrowed does not reduce. Because of this,
money will need to be invested elsewhere so
that the mortgage can be repaid at the end
of the mortgage term. Although the monthly
repayments are less than a repayment
mortgage, the risk is higher as there is no
guarantee that you will have sufficient capital
to repay in full at the end of the term.
Pension plan mortgage
This investment mortgage is also tax efficient,
but not flexible. The interest is paid to the
lender each month and the loan itself is
repaid at the end of the term from the
tax-free lump sum that the pension provides
06/
Information
about
mortgages
14

on retirement. Because you cannot access
your pension until you are 50, this type of
mortgage cannot be repaid until then. Again
there are no guarantees that the lump sum
will be enough to cover the full amount of the
loan at the end of the term.
Buy to let mortgage
This is a mortgage taken on a second
property that you intend to rent out. The
repayment method used for a buy to let
mortgage can be either repayment or interest
only. Lenders use the expected rental income
and amount of deposit paid to calculate how
much you can borrow.
Second mortgage / further advance
Homeowners who need a large amount of
extra credit can apply for a second mortgage
or further advance. It is a loan that is secured
against your property in the same way as
the primary mortgage. The difference is
that your initial mortgage has priority over
your home should payments be missed.
The second mortgage would only be paid
after a payment has been made to the first
mortgage.
Remember
If you are unsure of your options it is always
a good idea to seek financial advice.

07/
16
Deciding to take out credit
for the first time is often
a daunting task. With the
amount of lenders, endless
jargon and extensive deals
on offer it can be difficult to
know where to start. Here
we give you a step by step
guide to lead you through
the process.
Step 1 – check your credit score
The first step in taking out credit is to check
your credit rating. This is a score that
measures your creditworthiness based on
your previous credit history. If your credit
rating is poor, you will be offered a less
attractive deal as you will be deemed high
risk to the lender. A credit report can be
requested from Experian, Callcredit or Equifax.
Most of these companies offer a free 30-day
trial so you can check your credit rating for
free providing that you cancel the subscription
at the end of the trial period.
Step 2 – check your eligibility
Lenders may advertise attractive APRs that
you may not qualify for. Check what the APR
will be, based on your specific circumstances.
You may also need to check if there are any
prerequisites to your loan such as needing
a loyalty card, or having a current account
before qualifying for the best loan from a high
street bank. This is where sites like Freedom
Finance can be invaluable in assessing your
suitability without you having to go to the
trouble of actually making a full application.
Loan
application
checklist

Step 3 – don’t over apply
If turned down for credit, the tendency is to try
again with another lender. This is possible, but
bear in mind that each application will leave
a footprint on your credit file which will affect
your future creditworthiness. Do not apply for
too many forms of credit at one time. Again
the Freedom Finance soft search technology
is the perfect solution to avoid this common
problem.
Step 4 – consider borrowing more
Sometimes, the larger the loan, the lower
the interest rate. For this reason it may be
beneficial to take out slightly more than you
need to benefit from a more favourable
APR should it cross the higher threshold.
Remember though, you will still need to
repay the money so don’t borrow more
than you can afford to pay back.
Remember your circumstances may change
during the term of the loan. Make sure you
can afford the monthly repayments. If you are
having difficulties always contact your lender
Step 5 – consider other forms of credit
If you are looking to borrow a small amount
which you are planning to pay off quickly, then
a credit card offering a 0% interest rate for
a year may be cheaper than taking out a loan.
Step 6 – research insurance
There has been a lot of bad press about
payment protection insurance recently, but it is
not a bad product. It is an optional insurance,
which covers your loan repayments in the
event of accident, sickness or unemployment,
and as long as you are unaffected by any
exclusions of the policy (which should be
explained to you) then it may be a useful
cover. You should make that decision based
on your own circumstances.
There are other types of insurance available.
If you are unsure you can always seek
financial advice.
Step 7 – don’t forget early
repayment charges
You may think that you are being
conscientious paying your loan early, but
you might be charged for doing so. If early
repayment would be an option for you, check
the terms before signing up to ensure there is
no charge.
The Freedom Finance
footprint free soft search tool
has been designed to help you
avoid the potential pitfalls of
finding the right loan for your
circumstances.
By simply inputting your
details once, our search can
provide tailored actual quotes
rather than a simple rate table
found on other comparison sites.
The search results are returned
without leaving a damaging
footprint on your credit file,
which is only marked once you
choose a product.

If previous financial difficulties
have left you with a poor
credit rating, you may feel
that you can no longer obtain
credit. This guide will help
to improve your chances of
getting the right finance in
the future, and enable you
to start to rebuild your
credit portfolio.
How do I check my credit history?
The first step in rebuilding your credit rating
is to get hold of your credit reference file. This
is the document that lenders refer to when
deciding upon your suitability for a loan. Your
credit report can be provided by one of 3
credit reference agencies, Equifax, Callcredit
and Experian. Some offer a free 30-day trial
for you to check your report.
Will all lenders calculate the
same credit score for me?
No. Most lenders will refer to your personal
credit report when deciding if you are a
suitable candidate, but each use a different
criteria to determine suitability. There is no
such thing as a credit blacklist so if one lender
turns you down, you may want to try with
another.
What will affect my credit score?
Any missed payments on a loan or credit card
will have a detrimental effect on a credit score
as it implies that finances cannot be suitably
managed. On the flip side, if you have had a
lot of credit, but managed to pay everything
on time then you will be a preferred
08/
Borrowing
with a poor
credit history
18

candidate to someone with no borrowing
at all. Previous financial difficulty such as
bankruptcy, IVA or CCJs will also damage
your credit rating.
Do not apply for too many loans at a time,
as the rejections will affect your credit score.
I have never borrowed before
so why can’t I get a loan?
Lenders assess your ability at handling credit
when deciding on granting a loan, so if you
have never had credit before, it is harder to
determine how well you will be able to pay
it back.
How can I improve my credit rating?
• A good way of building credit rating is to
get a credit card and spend a little bit each
month, making sure that it is repaid IN FULL
the next month. This way you can prove that
you are a responsible borrower.
• Similarly, you may wish to take out a
personal loan from a company who will
lend to those with poor credit in order to
rebuild your creditworthiness. Again, if you
choose to do this, you MUST NOT default on
repayments.
• Another tip is to make sure you are
registered on the electoral roll at your home
address, and that your credit reference file is
up to date. Keep your applications down to
a minimum, as lenders will be cautious
of those who have previously been
refused credit.
Citizens Advice or
Step Change are available
to offer free advice for those
experiencing financial
difficulty
Freedom Finance
offers a footprint free ‘soft
search’ service, which is put
in place to protect your credit
rating going forward.
If you’re credit history isn’t
particularly good, a soft search
approach to finding the right
loan is essential to protect
whatever credit status you
already have.

The current economic climate
has made it increasingly
difficult for people to obtain
loans and, as a result, they
can become desperate for
extra cash. Unfortunately,
fraudsters prey on the
vulnerability of these people
and target them with the lure
of an easy and accessible
loan that really is too good
to be true. Read on for our
tips to protect yourself from
loan fraud.
TIP 1
If something sounds too good to be true,
it usually is. If you are offered a loan no
questions asked, then be wary.
TIP 2
Some companies are taking upfront fees for
credit brokerage services (loan arrangement).
If you pay this fee to a credit broker you are
entitled to a refund of this money (less £5)
if a loan is not taken out within 6 months of
the fee being charged or if you cancel your
arrangement with the broker. The Citizens
Advice Bureau has warned that these
companies are often persuading consumers
to give them their banking details. Consumers
are then offered little or no service in return
and are unable to get their money back. If this
happens to you, complain to the company
first, then if you do not get a satisfactory
response you can complain to the Financial
Ombudsman Service or your local Trading
Standards.
09/
Things to
look out for
20

TIP 3
Never give your personal details to anybody
over the telephone that you were not expecting
to speak to. If a company calls you, they should
already have the details you supplied them with.
Answering a few data protection questions to
companies who already hold your details such
as your name and date of birth is ok but never
disclose your bank account number.
TIP 4
Don’t pay the first ‘loan installment’ over the
telephone. It is unlikely you will see this money
again. Also, this provides the fraudster with your
bank details, which they can reuse. Direct debits
can be set up with legitimate lenders with the first
and subsequent repayments being taken
at agreed times of the month.
TIP 5
Don’t be tempted by unusually long repayment
terms. Although initially attractive, on closer
inspection many people end up paying a lot more
than they expected over such a long period.
TIP 6
Do your research. There are so many loan
companies out there so use the Internet to
determine the best deal for you, check their
credentials and check existing customer reviews.
Call the number they provide to check that it exists
and have a chat with the advisor about what they
can offer for your particular circumstances.
TIP 7
Don’t feel pressured into signing up. This is your
debt, not the company’s, so don’t feel obliged to
sign up to a loan you cannot afford. Simply take
their advice and shop around for the most suitable
agreement.
By being smart about your choices, and aware of
the fraudulent activity that can occur you will be
better equipped to obtain the required loan.
Freedom Finance’s footprint
free ‘soft search’ service
is professional and secure.
Simply enter your specific
details and receive a
personalised quote from
credible lenders. We present
true and accurate results and
look to reduce the chances
of loan fraud within our
industry.

It can be extremely
stressful to run into
financial difficulty and the
ability to obtain further
credit these days can be
challenging. However
daunting the prospect
of debt can seem, it’s
important to take control,
re-evaluate and prioritise.
Taking the time to reorder
your finances can not only
be the first step in getting
out of debt, but can even
save you money going
forward.
The following tips are
designed to help those
in financial difficulty by
advising what to do next.
10/
Managing
financial
difficulties
22

TIP 1 – act now
The stress of falling behind with repayments
can lead to people ignoring the problem
simply because they feel unable to cope with
it. The longer that payments are missed, the
higher the charges will become without the
debt ever reducing. If you feel that debt is
getting on top of you, act immediately. There
are options available to you, but these options
will reduce the longer your finances spiral out
of control.
TIP 2 – talk to your lender
If you feel that you are struggling with your
debt repayments, get in touch with each
of your lenders straight away. Explain your
situation and see if you can extend the term
of the borrowing in order to reduce the
monthly payments. Some borrowing comes
with payment holiday options, and if you have
been paying into an insurance policy, now is
the time to set the insurance cover in motion
should the reason for non payment be as a
result of accident, sickness or unemployment.
It may be that you can be accepted for a
consolidation loan that you can use to repay
your existing debts leaving you with one
single, easy to manage debt per month.
TIP 3 – make a budget, and stick to it
Work out what you need to live on day to day
with the priority being food and travel to work.
Remember that non-repayment of secured
debt can lead to repossession of the home or
car so this too must be high on the priority list.
Next outline your monthly bills and debts and
measure them against the income. If possible,
make cut backs by canceling luxuries like
satellite TV or gym membership.
TIP 4 – shop around
If you have a mortgage, see if you can transfer
it to a better deal. Can you sell your car, repay
the finance and buy an older model outright?
Shop around for car insurance deals; you may
be paying above the odds simply because
you haven’t searched elsewhere. Review your
mobile phone contract. Can you negotiate
a better deal? Do you need all those free
minutes? By shopping around, a little saving
here and there can mount up to a substantial
monthly saving, which can in turn be used to
pay off existing debt.
TIP 5 – take advice
Charities such as National Debtline and
Step Change (formerly Consumer Credit
Counselling Service) are available to offer free
advice to those struggling with managing their
debt. It may be that you need to enter into a
plan that allows you to pay a single reduced
monthly sum divided across your creditors.
Although this will affect your credit rating, it will
make a start in better managing your debt.
Whatever the debt counsellor advises, talking
to someone who can help may set your mind
at ease as you will be given a path to lead you
out of financial difficulty.

11/
Mortgages v credit cards
v loans v overdrafts
Mortgages
A mortgage is a high value loan that is taken out for the purpose of buying property.
Mortgages are categorised into two basic types, repayment and interest only. As the name
suggests, a repayment mortgage means that the borrower repays both the capital and the
interest that the remaining balance has accrued, each month. At the end of the repayment
mortgage term, which usually lasts between 25 and 30 years, the mortgage debt will be fully
repaid. An interest only mortgage allows the borrower to simply repay the interest throughout
the term on a monthly basis, but must find an alternative method of repaying the debt in full
at the end of the term. A mortgage is a loan that is secured against your home, which means
that your home is at risk of repossession should you fail to meet the agreed payments.
Advantages
% The primary advantage of taking out a
mortgage is that it makes home ownership
affordable. Rather than finding the huge
amount of funding required to purchase a
property, a mortgage allows you to make
the purchase and then repay the debt over
a lengthy term, in manageable installments.
% A further advantage is that secured
borrowing of such a high amount provides
a lower interest rate than other types of
borrowing. This is because the lender has
the security of this valuable asset should
the debt not be repaid.
% Unlike standard loans, there are
government led schemes such as Help to
Buy, NewBuy and shared ownership that
helps first time buyers to obtain this credit.
24
Disadvantages
x The main disadvantage of taking out a
mortgage is that your home is at risk should
you not be able to make the repayments.
x Some do not like the thought of carrying
a huge debt for a long time.
x Although the monthly repayments are
affordable, the total amount repaid
throughout the term as a whole is much
more than the original loan amount. This
is not due to high interest rates, but rather
to the frequency of interest payments
over a long period.

With such a variety of lending options available today,
taking the first step to obtaining the credit can seem
overwhelming. By looking at the advantages and
disadvantages of the major credit types, you can
approach the application process with the consideration
and knowledge needed to make the right choice.
Credit Cards
A credit card is lending which allows the borrower to make purchases based on their
pre-approved credit limit, the balance of which can be repaid each month along with
the interest accrued.
Advantages
% A credit card is a great tool to use when
making a big-ticket purchase, such as a
holiday. Rather than having to part with
a large amount of money, the credit card
allows you to spread the repayments over
a few months, making the purchase more
affordable.
% Credit cards are an efficient and secure way
of making Internet purchases. They can be
used around the world and are particularly
good for travel.
% A credit card offers protection against
fraudulent activity so if your card is stolen,
any money spent will be returned to you.
However the claim cannot be made if the
card provider finds that you have been
negligent, so keep your PIN safe!
% There are interest free credit cards available
which effectively provide you with a free
loan for a specified period. This is only
beneficial if you pay off your balance in
full at the end of the interest free period
to avoid high interest charges.
% Some credit cards offer incentives to
borrowers such as cash back, air miles or
loyalty points. These incentives mean that
the card can be used to save money, but
only if the balance if repaid in full ensuring
that the value of the rewards is greater
than the cost of the borrowing.
Disadvantages
x The problem of ‘buy now, pay later’ is
that the debt is prolonged. Some credit
cards have notoriously high interest rates
in comparison to other loan types, so it is
advisable to pay more than the minimum
payment each month to avoid your debt
spiralling out of control.
x Remember that using your credit card
to withdraw cash from an ATM can
incur a fee.
x If you are late with a repayment, or exceed
your credit limit, then costly penalty fees
are added to your bill. For this reason, it is
imperative to keep track of your credit card
spending.

Loans
A loan is a type of borrowing that is repaid to the lender over an agreed period, inclusive
of interest. This interest may be set at a fixed or variable rate. A loan can be unsecured
(personal) or secured against an asset such as a house. There are various specialised loans
tailored for big ticket purchases such as a wedding or car, those which can be taken out to
consolidate existing debts into a more manageable repayment, or business loans to assist
in the running of your company.
Advantages
% There are so many loan options available
that you can seek the perfect deal for your
individual circumstances.
% A loan allows a large purchase to become
affordable by spreading the costs.
% A consolidation loan can help to manage
your monthly budgeting and if paid
correctly, can actually improve your
credit score.
26
Disadvantages
x Taking out a loan is a commitment,
and a borrower is tied into the agreement
regardless of illness or job losses.
x If payments are missed, it can have a
damaging effect on your credit rating,
which may affect your chances of obtaining
future credit. You may also face legal
action, repossession of property or penalty
charges.
x Be aware that a charge is often incurred
if the loan is repaid early.

Overdraft
An overdraft is an extension of credit attached to your current account. The lender allows the
customer to withdraw money up to the agreed overdraft limit even if the current account balance
is at zero. This enables cheques to be cleared which would otherwise have bounced, as well as
honouring direct debits.
Advantages
% An overdraft is easy to arrange,
and can be set up quickly.
% This type of borrowing is often cheaper
than a loan because you only borrow
what you need.
% Interest is only charged on the value of the
overdraft used, not the facility as a whole.
% There are usually no early
repayment charges.
Disadvantages
x An overdraft can only be arranged
from the lender with whom you hold
your current account.
x The lender has the right to cancel
the overdraft at any time.
x If the overdraft limit is exceeded,
a charge will be incurred.
x The cost of this type of borrowing is
difficult to monitor, as the interest rate
applied is often variable.
Freedom Finance’s
footprint free ‘soft search’ service
which allows potential borrowers to search
for the best deal to suit their individual
circumstances, without damaging their credit
score in the process. A mark is only left on
a credit file after a product is selected. This
removes the risk of credit damaging multiple
rejections. By using this search, all available
credit options can be investigated footprint free,
and the most suitable product can be found
at an affordable rate.

More and more people are
turning to online lenders for
finance. But what are their
advantages, and are online
loans as trustworthy as we
think? Here we look at some
of the reasons why online
applications for loans are so
popular and likely to grow.
You can keep an eye on the balance
An advantage of an online loan is that it is
easily accessible. The current balance can
be easily checked and any changes to your
details can be updated quickly and efficiently
rather than having to visit a branch or speak
with a call centre.
Competitive pricing
Due to the growing market for credit during
the recession, more and more online
lenders are appearing. This is great news
for the consumer as these lenders must be
competitive in their pricing to make them
more appealing than their contemporaries.
Easily comparable
Many online comparison sites present tables
displaying lenders’ representative interest
rates that do not apply to all borrowers. One
of the solutions to this is to use ‘soft search’
tools offered by the footprint free site Freedom
Finance. This allows potential borrowers to
seek the most suitable loan based on their
individual circumstances, giving an actual
quote rather than an impersonal rate table.
The aim of this is to reduce rejections, which
are harmful to your credit file as no footprint is
left until a formal application is made.
12/
A guide to
shopping for
loans online
28

Privacy
Your personal details can be input privately rather
than having to discuss your circumstances in front
of a room full of strangers. Also you may not feel
comfortable divulging your personal circumstances
to a bank manager, whereas the ‘faceless’ online
lender takes away this problem.
Online loans are not the best option
for everybody and some disadvantages
are outlined below.
Difficulty in understanding online
terms and conditions.
Some customers value the explanation that a
face-to-face loan consultation can provide and
feel more confident in what is expected of them in
terms of repayment and changes in circumstances.
Some people prefer to ask specific questions, and
the answers may not be available online.
Online doesn’t give the opportunity
to explain complicated finances.
Individuals who have complicated financial
portfolios may feel more confident discussing these
matters with a financial advisor or personal banker
rather than trying to fit within the parameters laid
out by online application forms.
Online advertised rates
Online lenders will advertise rates that you may not
qualify for. A face-to-face lender would give you
the specific rate based on your circumstances so
you wouldn’t feel you were missing out on
a better deal.
Preferential rates may be offered
from your existing bank
If you have been with the same bank for some
time, it may be worth checking if you would qualify
for preferential loan rates through being a loyal
customer.
Make sure you take
advantage of the footprint
free, soft search tool offered by
Freedom Finance.
This innovative service allows
potential customers to enter
their details just once, and in
return be presented with actual
quotes that have been tailored
to the individual. The aim of
this is to protect credit ratings
by encouraging consumers
to apply only to the loans for
which they will be accepted.

Have you been rejected for
loans? Are you worrying how
to rebuild your credit status?
This guide will offer you tips
on what to do next.
Why am I being rejected?
There is no such thing as a credit ‘blacklist’
so don’t worry. The current economic climate
has meant that lenders are far less likely to
offer credit but that doesn’t mean there aren’t
options available.
What can I do next?
If you have been rejected for credit do not
continue to apply. Firstly, check your credit
report (from Equifax, Callcredit or Experian)
and check that it is correct. The problem
is that if you continue to apply and are
subsequently rejected for a loan within a
short amount of time, your credit rating
will be badly affected. As well as checking
your credit report, it may be worth using a
pre-application checklist, which will test your
eligibility for the loan before it is applied for.
This way you can determine whether the
credit was rejected as a result of poor rating,
or due to one off lender specific reasons.
Can I use a card to rebuild
my credit rating?
You may wish to transfer the balance you
already have onto a lower interest or interest
free card using a balance transfer. This will
lower your repayments to allow you to pay off
the balance faster by chipping away at the
loan, rather than the interest.
Using a soft search tool will allow you
to gauge your chances of obtaining the
credit without the lenders seeing your
application. This will have no impact on your
creditworthiness and so will reduce your
chances of being rejected in the future.
13/
Rejections
through
bad credit
30

If you find that the only loans you will be able
to apply for come with massive interest rates,
it may be wise to evaluate whether or not
you really do need to borrow. There may be
budgeting tools you can use to better manage
your finances, or if you are still struggling there
are free debt advice services available to help
you.
How can I rebuild my credit rating
once I have been accepted?
If you have been accepted for a credit card
this can actually help to rebuild your score
providing that the card is paid off in full, every
month. Even if you do not need the card, its
wise to spend a little on it each month then
repay the amount fully. This will prove to future
lenders that you are a worthy candidate for
credit because you can manage your finances
sufficiently well to repay debt in full every
month. Be careful though, because often
specialised ‘credit rebuilding’ cards come with
high interest rates, which isn’t a problem if
they are paid off in full, but can put you in a
worse situation if it is not repaid.
The best tip when obtaining credit is to only
borrow what you can afford to pay back.
Although it is tempting to request the highest
level of credit available to you, by borrowing
and repaying on time, your bad credit will
become a thing of the past.
Before making your next
application, use the footprint
free soft search tool available
from Freedom Finance.
This allows you to search for
the best loan rates to suit your
individual circumstances. The
best rates available on standard
rate tables offered by other
comparison sites may not apply
to you, which means that the
chances of rejection are high. The
soft search tool allows potential
borrowers to determine the best
rate without leaving a footprint
on the credit file. A mark will only
appear once a formal application
has been made.

The cost of having bad credit
can be damaging in many
ways. Your credit score
shows an endless list of
lenders and service providers
how much of a ‘risk’ you
pose to them financially
when it comes to lending you
money or providing you with
a product or service.
In today’s economic climate there are no two
ways about it; having bad credit will affect
you and a low credit score can be damaging
in many ways.
For a start, having a bad credit rating might
result in you not even being able to get a
loan. Even if you can, the cost of borrowing
is likely to be significantly higher than that
offered to someone with a higher credit
rating.
Credit or loan applications rejected
A bad credit rating will mean that in the eyes
of those granting loans or credit, you may not
be fit enough for them to take a risk with you
financially.
Remember that most organisations are profit-driven
and your credit rating is their way of
determining whether or not you fit the bill for
making them money.
A poor credit rating may see many
applications for loans and credit rejected.
Higher interest rates and higher
insurance premiums
A bad credit rating will mean that many
lenders, creditors and insurers will charge you
higher amounts for their products or services.
Many insurance companies check your credit
rating too.
14/
The cost
of having
bad credit
32

Difficulty purchasing many products
In today’s world, a mobile phone contract is
somewhat of a necessity to most. All mobile
phone companies check your credit rating
and a bad rating may mean that they don’t
grant you their service which can hit you in the
pocket when you‘re forced to pay more for a
pay-as-you-go service.
A bad credit rating will mean that you may
find it difficult to take out a car loan or end up
paying a high interest rate if you do manage
to buy one.
You may also find that organisations such as
utility companies or telephone companies ask
you to pay some kind of security deposit in
order for you to begin receiving their services.
Bad credit can impact your whole life
It’s not just your finances that will take the hit
as a result of you having bad credit.
Landlords may check your credit when it
comes to renting properties as this is their
way of checking how reliable you are when it
comes to paying rent. Imagine being turned
down for a perfect property because
of bad credit!
Some jobs even require a good credit rating,
too, such as those in the finance industry.
Call us on: 0800 432 0142
or from a mobile on: 0161 498 7727
(Monday to Friday 8am -9pm,
Saturday 8am to 6pm)
Email us at:
support@freedomfinance.co.uk

We hope that this guide
has done its job, to inform its readers
about the borrowing options available in the
market place today.
Now you have the knowledge about the different
types of borrowing, don’t forget to visit our website
www.freedomfinance.co.uk to make your loan application.
We are proud to offer our customers the innovative ‘soft
search’ option, which allows potential borrowers to check
their loan eligibility without leaving a harmful mark
on their credit score.
So what are you waiting for?

Freedom Finance Guide to Borrowing

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Freedom Finance Guide to Borrowing