Who is it for?

This Guide is for anyone who has ever borrowed money or is thinking about borrowing money but doesn't know where to start.

Throughout the booklet we have some helpful tips to get you thinking of the best ways to manage your credit.

What is it for?

From time to time, everybody, no matter their income level needs to borrow money. If you want to borrow money but are having difficulty accessing mainstream credit, such as from a bank or building society this, booklet is packed with information to help you make the right choices around money that suit your circumstances. It also tells you what kinds of credit are best to avoid. Finally, the booklet signposts to advice services where you can get the right advice if you are struggling with money or your current debt.

Why is this needed?

Money and Pensions Service (MaPS) highlight that 1 in 6 people use credit for everyday spending on things like food or energy bills. This means people do not have enough money to pay for essentials or any disposable income, to spend on these items. Life happens, and the factors that affect people's disposable income the most range from moving home, having a new baby in the house, losing your job or experiencing a relationship breakdown.

If a financial emergency was to happen, such as your washing machine breaking down, and you had no way of getting cash or credit, would you know where to turn?

When you borrow from high-cost credit providers, you will tend to borrow more money than required, when there may be a cheaper solution to meet your borrowing needs.

Around one-fifth of the UK adult population has less than £100 in savings or no savings at all, so when an emergency strikes, they may need to use credit.

What is the goal?

Financial resilience is being able to bounce back from a financial emergency without adding on more debt or making current debt unmanageable.

Financial wellbeing is about feeling secure and in control.

It is about making the most of your money from day to day, dealing with the unexpected, and being on track for a healthy financial future.

In short, this booklet is designed to help you feel financially resilient, confident and empowered. People who experience financial wellbeing are less stressed about money. This, in turn, has positive effects on their overall mental and physical health, and on their relationships.

Borrowing money means you are using credit. This can be from an individual or a financial service. Credit means it has to be repaid. There will be a credit agreement, and it will set out the terms you repay on, and the conditions of the loan. This section will help you to learn or understand the different terms around using credit.

Credit rating or credit score

A credit rating or credit score is a rating such as good, medium or poor or a number from 0-999 on a credit file. A credit file is usually held by credit reference agencies such as Equifax, Experian or TransUnion. Your file will have all your credit history on it.

Credit ratings are given depending on certain facts such as:

• Your previous and current home addresses being accurate and up to date
• The amount of credit you have at your disposal
• The amount of credit you are using at the moment
• Being able to keep up repayments for credit you have.

Using any of the credit reference agencies, you can access your credit file to check that your address history and other details are accurate and up to date.

Credit agreement

A credit agreement is a legally binding contract documenting the terms of a loan, made between a borrower and a lender. Most types of credit come with a credit agreement including home mortgages, credit cards, and finance for your car or mobile phones. For example, the credit agreement may not be with the shop you buy the item from but will be with the credit service used by the shop. Credit agreements can sometimes be renegotiated under certain, special circumstances.

Types of credit

Most people use their debit and credit cards to manage the money they have in their bank account, from wages or benefits payments. Most adults use both types of cards but there is a difference.

Credit Card

With a credit card, you’re borrowing money from the credit card provider.

Debit Card

With a debit card, you’re spending money directly from your own bank account. Both cards can help you with money management if you use them wisely.

High-cost credit

High-cost credit will cost you more than borrowing from a bank, credit union or other affordable lender. These lenders are out to make profit and although they are regulated, they have whopping costs on top of each loan such as high APR and interest. Always look for APR and interest rates – shown as percentage - and remember most online examples are representative so will not reflect the actual terms once your loan is agreed.

Buy Now Pay Later

In the UK, it is estimated that over 10 million people have used Buy Now Pay Later (BNPL). BNPL is a type of credit that needs to be repaid. There are generally two types of BNPL: the regulated type is usually interest-free for the first 12 months and used to buy larger items like sofas, carpets or furniture. Because these are regulated products, you should be protected if something goes wrong.

However, some BNPL is unregulated. This is still interest-free, but it is usually repaid in three x monthly instalments or in full in 3-months' time. These are for smaller purchases, such as clothes or smaller household goods, and you may recognise the names Klarna and PayPal associated with this type of credit.

If you use BNPL from several providers, it can become unmanageable if you do not keep on top of due dates for repayments. Try to cut down on spending using BNPL. If you get into problems, this may be noted on your credit file and affect how much you can borrow in the future. If you need budgeting help, visit Advice Works or Renfrewshire CAB. Find out more about BNPL from Money Helper website in the Resources section.

So, you need a loan?

When you start searching for a loan, it’s important to understand how loan costs and interest rates work before you apply.

Take a few minutes to find out about APR, to make sure you’re armed with the information you need to move forward with your plans.

What’s an APR?

APR – or Annual Percentage Rate – refers to the total cost of your borrowing for a year. Importantly, it includes the standard fees and interest you will have to pay.

Example

Your repayments are the same every month because of how the interest is calculated. At the start of the loan term, your repayments will include more interest but less of the loan balance. Towards the end of the loan term, your repayments will include less interest but more of the loan balance.

What’s a representative APR?

APR can help you compare lending products, such as loans or credit cards, on a like-for-like basis.

If you search for a loan, say on a price-comparison site, the different loan options are often ranked by representative APR.

The clue is in the word ‘representative’. When a loan is advertised with a representative APR, it means that at least 51% of customers receive a rate that is the same as, or lower than, the representative APR – although not everyone within the 51% will necessarily get the same rate.

It can be easy to assume that the lender with the lowest representative APR you find advertised will give you the best rate. However, when you apply, it is likely you will receive a personal APR based on your circumstances. This could be the same, higher, or lower than the representative APR. Normally, if you can get credit from a bank or a building society it is a cheaper way to borrow rather than from another type of lender.

Affordable credit can help people who are unable to access loans or credit from banks or credit cards (mainstream credit) and who may be at risk of using higher-cost credit or illegal lenders such as loan sharks. Affordable credit is credit delivered in a fair and responsible way and can be a lifeline to help you weather income shocks and spread the cost of essential items. This section lets you see the variety of financial service providers offering affordable credit.

Can you save money?

Saving money can be difficult to do when money is very tight. If you are on a low or fixed income, the Advice Services provided in this booklet may be able to look at your income and check if you are getting everything you are entitled to. Start with saving small and try to keep it regular; £1 per week is better than nothing and can help you towards that longer-term financial resilience we mentioned at the start of the booklet.

Credit Unions – what are they and how can they help me?

A credit union can be a great way to save for a rainy day, and borrow money responsibly for what you need not what you can get. You join a credit union and not only become a member but have a say in how it is run. They are local, friendly, ethical and fair financial services providers to save with and borrow from. Many people, whether they are able to access mainstream credit or not, choose to save and borrow with a credit union because they are not-for-profit cooperatives, and can be a cheaper alternative when borrowing.

Credit union history

The first credit union in Britain began trading in 1964, and over the last 50 years, credit unions have grown to provide loans and savings to more than 1.2 million people across England, Scotland and Wales.

Credit unions have a proven track record across the world. In fact, 217 million people are credit union members in 105 different countries.

Membership

A credit union is a financial co-operative, which provides savings, loans and a range of services to its members. It is owned and controlled by the members.

Each member has one vote and volunteer directors are elected from the membership, by the membership. Credit unions offer more than just savings and loans, there are junior memberships, funeral bonds and Christmas savings clubs to make sure you have the right option for your rainy day savings.

Credit unions are owned by the people who use their services, and not by external shareholders or investors. Therefore, the emphasis is always on providing the best service to members – not maximising profits.

Common bond of credit unions

Membership of a credit union is based on a common bond. This can be working for a particular employer or in a particular industry, or simply living or working in a specified geographical area, which could be as small as a village or as large as several local authority areas. Credit unions come in all shapes and sizes. Whether you’re looking for a credit union with online and phone banking, a payroll partnership with your employer, a local branch or service point you can walk into – or a combination of all three – there’s a good chance you’ll find the credit union you’re looking for to meet your needs.

Festivals and Christmas

Festivals and Christmas come around every year, but rarely are we prepared for the outlay of money for gifts, food and other expenses. By making small savings each week you will be able to set targets for larger spending pots of money, and all credit unions in Renfrewshire offer Christmas Savings club. Get in touch to join your local credit union to save for those special occasions.

Workplace or payroll savings

Credit unions offer workplace or payroll savings. This is money deducted from your salary before you are paid. Your employer agrees to be a workplace and staff will be members of the same credit union. Many employers offer payroll savings into a credit union account. You need to be a member of a credit union to do this.

Young people

All credit unions offer junior or family accounts to get your young ones into saving what they can when they can.

Find your local credit union website

Renfrewshire has five credit unions for residents, students, employees and employers to choose from. Use the list below or the Find Your Credit Union website to find the one local to you. Visit https://www.findyourcreditunion.co.uk/.

Gleniffer Credit Union

https://gleniffercreditunion.co.uk/about/

18 Skye Crescent, Paisley, PA2 8EL

Telephone: 0141 583 4905

Gleniffer Credit Union is a small credit union in the heart of Glenburn. Their common bond is you must live in postcode areas PA1, PA2 or PA3 and you can join by visiting or calling. Opening Hours Tue: 10am - 2pm, Wed 12pm - 5pm, Thurs.: 11am - 3pm. Last Sat of the month: 10am - 12pm*

*If the last weekend of the month is a bank holiday weekend then they are open on the Saturday prior.

Johnstone Credit Union

https://www.johnstonecu.co.uk/index

26 Church Street, Johnstone, PA5 8DU

Telephone: 01505 327148

Johnstone Credit Union is open Monday to Friday, 9am - 3pm. Their common bond is you must live in Renfrewshire. They also have a handy app to make accessing your membership easier.

Right Way Credit Union

https://rwcu.co.uk/how-to-join/

41 High St, Paisley PA1 2AH

Telephone: 0141 889 7442

Right Way Credit Union is open Mon, Tues, Thurs, Fri 10am - 2pm. closed Wednesday. Their common bond is you must live, work or study in the West of Scotland with PA, G, ML or KA postcodes. Right Way Credit Union have a handy app to make accessing your membership easier. Some people struggle to get credit because of affordability, which means that your income may not be enough to repay your loan in full. If you live on a fixed or low income, you may be entitled to certain benefits. Right Way Credit Union has a benefits calculator to check you are getting everything you are entitled to. 

Scotwest Credit Union

https://www.scotwest.co.uk/about/joining/

An online only service

Telephone: 0141 237 2390

Scotwest Credit Union is an online-only credit union. Their common bond is you must live or work in the West of Scotland, Stirling, Perth & Kinross, Dumfries & Galloway, Falkirk, Clackmannanshire or Highlands. Anyone up to the age of 15 years of age in those areas can open a Moneywise Account if they attend a participating school.

Joining Scotwest is simple and straightforward. You can apply to become a member if you:

• Live or work within the areas noted above,
• Work for one of their named employers
• Or are a Young Scot Card Holder from anywhere in Scotland.

Scotwest also have a handy app to make accessing your membership easier.

White Cart Credit Union

https://www.whitecartcu.co.uk/membership

73 Neilston Road, Paisley, PA2 6NA

Telephone: 0141 889 3005

White Cart Credit Union is open Monday - Saturday 9.30am - 12.30, except Thursday, hours are 10am - 2pm. The common bond is you must live, work or study in Paisley.

Fair For You

https://www.fairforyou.co.uk

Fair For You are a not for profit lender which provides flexible, affordable loans for your household essentials, like cookers, washing machines and furniture. They do not provide cash loans. You can explore hundreds of quality products from trusted retailers on their website, from dishwashers and tumble dryers to microwaves and beds. If you need it, you can choose to have your old appliance taken away and your new one installed by their delivery partners. Customers can repay loans weekly, fortnightly, 4-weekly or monthly depending on their income.

Food Club from Fair For You

The Food Club Card helps you stock up your freezer at Iceland and The Food Warehouse both in-store and online. Customers apply for the card through the Fair For You website and your credit is applied to a preloaded card sent to you in the post. Fair For You will work with you to repay the credit.

What is a CDFI?

It is most likely, you won't have heard of a CDFI but these are financial services set up to lend only. A CDFI is a Community Development Financial Institution or community lender. Lenders like these offer affordable credit and enable responsible borrowing. These lenders are social enterprises so do not set out to make profits from customers. Any profit they make is put back into their products. They work to strict regulations and are licenced to lend money under the Financial Services Compensation Scheme. The maximum you can borrow from these lenders is about £1500 - £2000.

Conduit Loans Scotland is a responsible community lender offering fair and affordable personal loans and who present an alternative solution to high cost credit. https://www.conduit.org.uk/

When you borrow money, all legal lenders are regulated by the Financial Conduct Authority (FCA), or have compensation schemes through the Financial Services Compensation Scheme (FSCS). These lenders are licensed to lend money, whether it is an affordable loan or high-cost credit.

Illegal money lenders or loan sharks operate outside this framework. They do not have a licence to lend money and they are not regulated under any authority. An estimated 3million people in the UK have used a loan shark and when surveyed* said they would never use one again.

 You have not committed a crime if you have used a loan shark, the lender has.

If you are unsure about who you are trying to borrow money from, an easy way to check is using this website from the Financial Conduct Authority. Visit https://www.fca.org.uk/firms/financial-services-register.

How to spot a loan shark

Loan sharks usually advertise by word of mouth, sometimes online, and appear friendly and accommodating at the start. However, they prey on the most vulnerable people in society and cause immense misery. If you are worried that someone you have borrowed money from, or are planning to borrow money from is a loan shark, consider the following questions:

• Did they offer you a cash loan?
• Did they not give you any paperwork?
• Have they added huge amounts of interest or APR to your loan?
• Did they change the terms of the loan without warning?
• Have they threatened you?
• Have they taken your bank/post office card, passport, watch or any other valuables from you?

It may be that you are concerned not for yourself but a family member or a friend. If you or they can answer yes to one or more of them then it is possible you are borrowing from an illegal money lender.

How to get support and help if you’ve borrowed from a loan shark

A credit union may not be able to help you if you are in a crisis with money, but if you are a member of one of the five serving Renfrewshire, it might be worth speaking to them about managing debt. Make an appointment with Renfrewshire CAB who will be able to check if you are eligible for a crisis grant, and if you owe money to legal creditors, they may be able to advocate on your behalf. If you are in danger, you should call Police Scotland on 101.

If you have borrowed money from a loan shark and are feeling trapped, out of control or threatened, don’t worry – you are not alone.

You are not in trouble if you have borrowed cash or have been paying back a loan from an illegal money lender – they are the one committing a crime, not you.

The Scottish Illegal Money Lending Unit (SIMLU)

Take the first step to getting your life back and managing your money and debts by calling the confidential loan shark helpline or via the online reporting form.

The helpline is open 24 hours a day, 7 days a week for anyone who has any concerns or questions about illegal money lending or loan sharks. SIMLU can provide immediate support with urgent issues and longer-term support to help you move away from using loan sharks.

Telephone: 0800 074 0878 or visit https://stopillegallending.co.uk/ to use the online reporting form.

What is happening locally?

The Renfrewshire Affordable Credit Alliance conducted a Survey and found that some people in Renfrewshire had used loan sharks. These people knew them from their community and used a loan shark for everyday spending. When repaying they told us they paid back double or triple what they borrowed. Some were threatened and some felt threatened by the loan shark. They all vowed they would never use a loan shark again. Do not hesitate to ask someone if you notice any change in their behaviour and know they may be struggling with money.

If you are worried about paying bills or balancing your budget, or are at risk of turning to a loan shark help is at hand from local advice providers

Advice Works

This confidential service is free and is provided by Advice Works advisors, part of Renfrewshire Council support. They are on hand to help you with any money worries you have. They also offer advice on:

• Heating v Eating
• Feeling under pressure with bills?
• Need help completing benefit forms?

You can get confidential advice on money, debts, benefits, food and energy from Advice Works.

Telephone and Online Service

Please call the Helpline on 0300 300 1238 to speak to an Advisor or email them at adviceworks@renfrewshire.gov.uk

Opening Hours:

Monday to Thursday, 8.45am to 4.45pm

Friday, 8.45am to 3.55pm

Renfrewshire Citizens Advice Bureau

Renfrewshire Citizens Advice Bureau is a local, independent charity that provides free, impartial and confidential advice and information to give you the tools you need to sort out any issues or problems. You can call to speak to an advisor or make an appointment on any issue related to debt and money, benefits, work, housing, family or consumer.

Please call their service on 0141 889 2121 to speak to and Advisor or make an appointment. You can also use their online form https://www.renfrewshirecab.org.uk/book-appointment.

Address:

7 Glasgow Road, Paisley, PA1 3QS

Opening Hours:

Monday to Friday, 10am – 4pm