Most people at some time will use credit to purchase goods or services, for example, by obtaining a personal loan through a bank or building society, hire purchase, or a credit agreement with a trader. Before buying anything on credit you should consider the following points.

Work out what the total cost of the loan will be. Can you afford the repayments? Look at the length of the loan not just the monthly repayment. The longer the loan period, the more interest you'll pay back. Shop around for credit to get the best deal. There are many different types of credit, which all charge different interest rates.

Check the APR : the Annual Percentage Rate of charge is an expression of the total charge for credit for each year of a credit agreement. Generally speaking, the lower the APR the better the deal. Sometimes a low APR is only offered for a short period. Some traders offer interest free credit (0% APR ) but you will need to take care that you are not paying higher amounts in other ways; for example, it may be a higher cash price than you would pay for the same goods elsewhere.

Make absolutely sure you have read and understood all credit agreements before signing them. If there is anything you do not understand, ask. Check whether the loan has a variable rate of interest. If it has, your repayments can go up as well as down. Make sure you can really afford it. Watch out for other charges, such as a broker's arrangement fee. Is PPI (Payment Protection Insurance) included? Have you asked for it? You don't need to take out PPI if you don't want to. It can be expensive and may not cover you if you are self-employed or on a short term contract.

Some loans are only given if they are secured on your home. These are not available if you rent. A secured loan gives security to the lender, not to you. If you cannot keep up with the repayments the lender can sell your home to cover any loss. You might get a lower rate of interest with a secured loan but you could have a lot at stake.