As a consumer, it is important to understand your rights when it comes to taking out credit agreements. One right that you may not be aware of is the cooling off period.
What is a cooling off period?
A cooling off period is a set period of time within which a consumer can cancel their credit agreement without incurring any additional charges or penalties. This period is set out in the Consumer Credit Act 1974.
How long is the cooling off period?
The cooling off period for credit agreements is 14 days. This means that if you sign a credit agreement and change your mind within 14 days, you can cancel the agreement without being charged any additional fees or interest.
What types of credit agreements does the cooling off period apply to?
The cooling off period applies to most types of credit agreements, including personal loans, credit cards, hire purchase agreements, and payday loans.
However, there are some credit agreements that are exempt from the cooling off period. These include agreements for business purposes, mortgages, and agreements for fixed-sum credit that are repayable within three months.
How do I cancel a credit agreement during the cooling off period?
To cancel a credit agreement during the cooling off period, you should contact the lender in writing and inform them of your decision to cancel. You do not need to give a reason for cancelling.
Once you have cancelled the agreement, the lender must refund any payments you have made within 30 days. Any interest charged must also be refunded, and any security or guarantor must be released from their obligations.
In conclusion, the cooling off period is an important right that gives consumers the ability to change their mind about a credit agreement without incurring any additional charges or penalties. Be sure to understand your rights and take advantage of the cooling off period if you need to cancel a credit agreement.