Catalogue loans or catalogue credit have been around for decades and while they’re currently being overshadowed by newer buy now, pay later schemes for online shopping, catalogue loans are still around and work much in the same way they always have.
A catalogue loan is accessed by ordering an item through a catalogue and repaying the cost over a few months – typically between three months and twelve months so you repay the cost in instalments, instead of paying for the item in one lump sum straight away. This can make shopping more manageable as your finances won’t take such a big hit in one go, however it does mean you may end up paying more for your shopping as interest is often charged for your borrowing.
The interest rate for catalogue credit ranges between providers, but it can be as much as 49.9% APR and above, which makes it an expensive form of credit if you are repaying your borrowing over 12 months.
If you have a credit card or overdraft facility which has a lower interest rate, these would be better alternatives to catalogue credit; however, the best alternative remains your own funds. Saving up for expensive items is always more advisable than taking out credit as missing your repayments can harm your credit file, which makes borrowing in the future more difficult. Additionally, taking out credit when you don’t really need to might reduce the availability of credit in the future if an emergency expense arises.
The main disadvantages with catalogue credit are the same as with most types of credit products: it will cost you more than buying the item up front as you will be charged interest on top of the cost of the shopping.
Of course, sometimes borrowing is more of a necessity than a choice – say, for example, your washing machine breaks in the middle of the month. You might not have the funds to buy a new washing machine immediately, but you need clean clothes for work and for school, so buying a washing machine before payday is a must and therefore borrowing in order to facilitate that need is probable.
Needing to make a necessary purchase doesn’t mean you have to use catalogue credit or buy now, pay later. It’s always best to look around and try and find the cheapest loan for what you need. You should also work out if you can budget a little better for the rest of the month and put some of your own money towards the cost, so instead of borrowing £200, you might only borrow £100, which means you’ll pay interest on a much smaller loan principal and so it will cost you less in the long run.
When budgeting, make sure you include all your upcoming payments and try to think if you have any annual bills due, such as an MOT or house insurance, as well as monthly bills, as one-off yearly payments can often catch you out when it comes to managing your money.
Ultimately, it’s always better to wait until payday or wait until you’ve saved up enough money when it comes to making big purchases, but we understand that it’s not always that easy. Sometimes borrowing money through catalogue loans or alternative credit products isn’t a choice. Just make sure you’ve budgeted for the repayments and you aren’t making financial commitments that you can’t afford – check your normal budget and see if you can free up some extra cash in order to facilitate loan repayments or to reduce the amount you need to borrow.
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