HOUSEHOLDS have been warned about new loans that may see you spending more about the money you owe.
People with a bad credit score scores might find it harder to gain access to from banks or get credit cards.
And when they do, usually have higher rates of interest on their borrowing.
Some lenders are providing loans where they reduce these high rates of interest if you make your financial troubles repayments on time.
But this kind of loan could leave you struggling to create a real dent on the amount your debt.
Fresh warnings have been issued about these types of loans after guarantor lender, Amigo, launched something new.
It was charged with handing out "irresponsible" loans, lending to customers who couldn't repay in 2023.
The company paused lending carrying out a raft of complaints, and people affected might be returned a proportion of any interest they had paid which could be up to 41%.
Now, it is offering a brand new loan which will see borrowers' interest repayments reduce by up to 15 percentage points if they pay back on time, according to the Financial Times.
Other information mill offering similar loan repayment terms.
For example, LiveLend will reduce your interest whenever your credit rating rises.
For every 25 points your credit score increases, the loan rate lowers by 2% if you keep up to date on repayments.
But borrowers happen to be warned their loan instalments won't reduce as much as they think.
Because the eye is front loaded you mainly spend the money for high rates at the start.
That means cuts later down the road don't actually help you save much.
Sara Williams, founding father of debt news website Debt Camel, said: “Cutting interest rates may sound good, but it is easy to assume your repayments will fall more than they'll since the early repayments in a loan are almost all interest same goes with attend the first high rate.
"So reducing the rate during the loan won't cut the repayments as to the they'd happen to be when the loan have been in the lower rate from the beginning."
She said that on one LiveLend loan for instance, when the interest rate was cut from 12.9% to 10.9%, the monthly repayments only dropped from lb211.41 to lb206.38.
It may come as more households are turning to counting on credit and finance to help them with the cost of living crisis.
And an investigation by The Sun revealed hard-up households are being targeted with mis-leading adverts for loans with rates as high as 1,721% on Facebook.
In recent years the City watchdog has cracked down on high cost credit, including doorstep lending, rent-to-own, overdrafts and payday lending.
It follows The Sun's Stop The Credit Rip-Off campaign to help the countless families who fall prey to doorstep and legal high street loan sharks.
A report in the Financial Conduct Authority (FCA) in 2023 found that nearly 3million people use expensive credit.
Ways of avoiding high cost credit
There exist several methods for swerving high cost credit options.
You might be able to borrow from a local credit union. These are small not-for-profit groups that help people save and borrow money.
Sometimes they are for people living in a particular community or individuals who operate in a specific kind of business.
You will discover which bank you are entitled to join by searching here or by calling the Association of British Lending institutions Limited (ABCUL) on 0800 015 3060.
If you are struggling before payday, ask whether your employer may offer you funding on your wages.
If you are well on benefits and facing a watch for the first payment you can speak to your Jobcentre Plus adviser to ascertain if they are able to arrange a short-term advance which will need to be paid back whenever your benefit comes through.
If you're following a new sofa or washing machine it may be worth considering whether you can purchase it second-hand.
Use websites like Freecycle to locate items for free in your local area.
You'll also be able to find goods nearby on local Facebook groups, eBay and Gumtree.
If you're taking out a loan, you'll want to get the best deal.
To compare loans, you can use a comparison tool.
MoneySupermarket, Experian and Uswitch are among a few of the companies offering this service.