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CCCFA and how it affects you

CCCFA and how it affects you

You have probably heard a lot of talk lately around recent changes to the Credit Contracts and Consumer Finance Act (CCCFA), and the extra hurdles that have been put in place when applying for credit. Does this mean that it’s now harder to borrow? Well, maybe not….

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To put it simply, the CCCFA is a consumer law that protects you when you want to borrow money. The Act sets out rules that we as a finance company must follow when lending money. The main aim of the Act is to ensure that each loan is suitable and affordable for the borrower.

Here we have listed some of the things our lenders look at when assessing whether a loan is suitable and affordable, and what you can do to ensure your finances are in the best possible shape before making an application for finance.

Things key things we look at:

  • Your bank statements

We review your bank statements to determine whether or not you have the ability to repay your loan before providing finance. We check:

  • Your incomings (E.g. Wages, salary) and your fixed outgoings (e.g. rent/mortgage, insurance, power, food and groceries etc).
  • For any payment defaults
  • What other debt you may have. i.e. credit cards, Buy now, pay later loans
  • Your credit history
  • Your employment status and history
  • Your residential status

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Things you can do before applying for credit:

  • Keep a record of your expenses before applying for a loan, then create a budget that you can follow;
  • Set up direct debits for your key bills. It can sometimes be hard to remember which bill is due and when, so direct debits are a great way of ensuring you are paying your bills on time. Any missed bills can impact your credit score;
  • Aim to control your discretionary (non-essential) spending. Whilst we don’t focus on which fast food outlet you frequent, we are required to take these expenses into account when assessing your loan;
  • Ensure any defaults are paid off before applying for credit;
  • Aim to pay your credit card balance off in full each month;
  • Be cautious about accepting buy now, pay later payment options. What initially looks like a small repayment each week does add up quickly, and will impact on how much you can borrow.

It can seem like a lot to take in, however it is important that you plan and budget accordingly so that your finances are in order when you’re ready to take out a loan. Remember, the CCCFA helps ensure that all parties are comfortable that you are not extending yourself beyond your means.

Please get in touch with our friendly team at Oxford if you have any questions around applying for finance.

We look forward to hearing from you.