THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

Tape Transcript by JANE TEMPLE

MONEY BOX LIVE

Presenter: Paul Lewis

Guests: Martin Lewis, Nick Lord, Chris Motton

TRANSMISSION 29th APR 2002 1500 - 1530 RADIO 4

ANNOUNCER : It's two minutes past three and time for MONEY BOX LIVE with Paul Lewis.

LEWIS: Hello, and today we answer your questions on borrowing money, not for a house but for well almost anything else - ordinary old debts secured not on your home but on your word, or at least on your bank account and your credit record. We've never been so much in a debt - as a nation we owe 140 billion pounds between us excluding mortgages. For most people credit has never been easier to get, but a minority of people are just frequently refused credit. Why? - sometimes nowadays just because they've moved. Why does it happen and what can you do about it? The main high street banks still dominate lending, but the best deals can often be found elsewhere. Why pay 16% when you need only pay 8? And is it ever worth accepting the credit deal offered by the retailer? The electrical retailer Dixons was criticised by the Office of Fair Trading last week for offering interest free credit that sometimes wasn't, and the court of appeal ruled on Wednesday that a credit agreement which turned an �8,000 loan into a �28,000 debt as not fair and not enforceable. What can you do if you think you're being unfairly treated, and what can lenders demand? Company car drivers have been hit this April by changes to the tax on their cars. Many are wondering if it's better to buy their own car, what's the best way to finance it? - hire purchase, personal contract or a loan from the bank? And are cars bought on credit abroad really cheaper? Well whatever your question call Money Box Live now - 08700 100 444 With me today to answer your questions about borrowing money are Martin Lewis, a consumer finance journalist and an expert on personal borrowing, Nick Lord a debt specialist with the National Association of Citizen's Advice Bureau, and David Motton, consumer editor of 'What Car' magazine. And the first question is from Sue in Aldershot. Sue your question?

SUE: Oh good afternoon. I'm from Frimley Green actually. My question's about annual percentage rates - APRs. As I understood it an APR related to the whole length of the loan that the rate that you paid overall. But my bank's supplying what they quoted as an APR in my documentation on a monthly basis. Can you help?

LEWIS: Right, well let's explain APR - it's a bit of a tall order - Nick Lord do you want to go first on this?

LORD: Good grief what a way to start. Well Sue the APR, the annual percentage rate of charge is meant to be a way to enable you as a consumer to compare the costs of different types of loans. So it's meant to tell you what the annual cost is going to be of that loan. And on the basis of that clearly if you have an annual percentage rate of 26% that is a worse deal than an annual percentage rate charge of say 10%, so you'd go for the 10% loan. What your bank are doing is they're expressing it as a monthly rate and credit card companies often do this. They say we'll charge you 2% a month and that equates to an annual rate of about 27/28%. I think what I would say to you as a consumer and anybody else listening is the APRs important but it is very complicated and actually what you really need to be doing is have a look at the APR, but crucially have a look at the total amount that you're going to repay on that credit deal over the whole course of the loan. And use a combination of information available to you.

LEWIS: And Martin Lewis, you are obliged to be told what the total cost of the loan will be over the whole period aren't you?

LEWIS: Well if you asked they need to tell you, but it's very rarely in the advertising and it's something that's often misleading. In personal loans, one of the big issues there is payment protection insurance. The government tried to stamp this out a few years ago but the lenders have got a way round it.

LEWIS: Now payment protection insurance is where you pay an extra amount to ensure the payments if you lose your job or you fall sick or whatever?

LEWIS: Exactly and a lot of people think it's a good thing to go for. Generally I'd actually say only on larger amounts should you really be considering. But what happens is the lenders tend to bulk the cost of the loan on to the expensive payment protection insurance and advertise a cheap loan rate, so for example if you borrowed �10,000 over 5 years with Northern Rock at 8.1%, the cheapest non Internet lending, that's the cheapest way to go if you don't want insurance and it's cheaper than Intelligence Finance at 8.9%. But if you get the insurance, the total cost with Intelligent Finance which has a higher APR is �13,300, but with Northern Rock it's �14,300 because of the cost for the insurance. So it's �1,000 more even though that headline APR is cheaper, so always ask the total cost as Nick said.

LEWIS: So I think Sue that the important thing. Look for the total cost.

SUE: They won't tell me the total cost because they say it's supplied monthly.

LEWIS: It's a credit card that we're talking about here?

SUE: No, no this is a bank loan.

LEWIS: Nick, they must

SUE: And they wouldn't even tell me what base rate they were working on.

LORD: Sue what you need to do. Okay what you do is you write to them and you say you want to see a copy of the original credit agreement. They are obliged to supply that. If they can't supply that the loan is legally unenforceable and that must tell you what the APR is on an annual basis. If it doesn't say immediately go and see your local trading standards or local Citizen's Advice Bureau because it maybe an unenforceable loan. They can't get away with saying we're not going to give you the information.

LEWIS: And it must show the total cost for credit mustn't it?

LORD: If it's a fixed amount yes

LEWIS: And generally if you have a complaint it's Trading Standards who regulate personal loans, it's not the apparently ubiquitous Financial Services Authority?

LORD: No, it's the Trading Standards, the Office of Fair Trading because they have responsibility for the Consumer Credit Act.

LEWIS: Okay, good advice there. Thanks very much Sue from Frimley Green for your question, and now Vishwa in London your question Vishwa?

VISHWA: Hello yes, I want to ask about raising funds to do home improvement and I suppose traditionally the cheapest way would be to extend my mortgage, but I've noticed that there are these fixed rate credit card companies are offering at the moment, and I just wondered whether there were any drawbacks of going down that route?

LEWIS: Right, so you've got a mortgage, you feel you could remortgage but is a credit card cheaper - Martin Lewis?

LEWIS: The straight answer to that is yes. If you are prepared to play the system and monitor your finances and you are financially literate, credit cards are without doubt the cheapest way to fund any form of loan these days. You can either do it by rotating the zero percent interest offers. There are five on the market at the moment. Egg, RBS Advanta, Capital One, Halifax and Bank of Scotland.

LEWIS: So this is where you take out a new card and you get zero percent for a certain length of time?

LEWIS: On your purchases. Or what you could do is you could borrow the money on a different card and then get a balance transfer offer. In many ways for most people that's the cheapest way to go without having to rotate. For example Barclaycard has launched a new balance transfer offer at the moment of just 2.9% interest. So if you borrowed money on one card and shift the debt over and that rate lasts until you've paid the loan off. The big warning is never spend on that card cos then they have ways of getting your interest back. But that's much cheaper than a mortgage. Having said that you need to monitor it incredibly carefully.

VISHWA: Well why would you need to monitor it if it didn't change?

LEWIS: Why would you need to monitor it? - because you need to make the minimum payments first of all of 3% or �5 and you're responsible for doing it so you don't get late payments. You also need to make sure you never spend on it and they will try and persuade you to spend on it with lots of different incentives to spend. So you need to throw it away and put it in a drawer. It's a more complicated form of financing. Having said that, 2.9% over a short time compared to 5% over a much longer period. When you get a mortgage it's a much longer period and the longer you take money out for the more it will cost you.

LEWIS: Nick Lord, you must see people who think they can play the system but end up in difficulties?

LORD: I think Martin's got a wonderful attitude and I think technically he's absolutely correct and I think on a practical basis that is going to be horrendous. I have to say for the vast majority of people and consumers, the reality of the consumer credit system we have in the UK at the moment is that UK consumers don't know a sufficient amount about consumer credit, and whilst I reiterate I think Martin technically is correct, I would hate people listening to the programme to go out and think gosh what we must do now is borrow money on our credit cards because our experience within the CAB service is that a proportion of that and probably a significant proportion will have problems further down the line. But 10 years time it might be exactly the thing to do.

LEWIS: So the cheapest way but you've got to be very careful. Let's move on - we've had an email here from David Thomas who wants to know about replacing his eight year old Renault. I've got an eight year old Renault 5 - he wants to replace it for a more modern car. He doesn't know the most cost effective way of doing it. We've thought about buying a new or nearly new car on a three year lease arrangement, buying from abroad or buying second hand in the UK. What advice, bearing in mind as he rightly says car is a rapidly depreciating asset? David Motton from 'What Car' - if you're buying a car what are the options now?

MOTTON: Okay, well let's look first at the issue of depreciation. Basically if you are buying a new car depreciation is going to hit you hard. There's no question about it. Looking at a car that's perhaps a year old or two years old is definitely going to save you money in that respect.

LEWIS: But someone else has taken

MOTTON: Absolutely. It's the first part of the lifetime of that car which is really the expensive part in depreciation terms. But we all like in this country to have the latest registration letter plate on the front of our cars. We love to be the first one in our street to have the new number plate. We like to have new cars so if you do want to go the new car route but you really want to make sure you're paying a sensible amount of money on finance there are a large number of options - it can be quite baffling especially with so many different brand names being thrown at you. But fundamentally in your local dealer negotiating for a new car the most common kind of loan you're likely to talk about is higher purchase, the simplest form of motor finance, typically three years the balance of your loan will be divided up over those three years into monthly periods.

LEWIS: One problem with that though is that you don't actually own the car till you've made the last payment. And if something goes horribly wrong in your life and you don't make your payments they can take the car back?

MOTTON: Absolutely yes. It's secured against the car so that's one of the disadvantages which is why it's well worth looking at as an alternative - an unsecured loan from the High Street - you may well find that the APRs are just as good if not better, and even if you do think okay well I don't really want the hassle of spending too much time going from bank to bank, a few minutes spent on the Internet can get you a good idea of the kind of deal, the kind of APR and total cost payable you could find in the High Street, and you can use that as a stick to beat the salesman around the head with and help drive down the cost of the loan from the dealer.

LEWIS: What about these personal contract purchases and personal contract hire - sort of leases, the kind of thing I think David was asking about? They seem complicated, are they straightforward? I know the RAC is saying today that 90% of motorists have never heard of them, and of those that had almost none understood how they worked?

MOTTON: I think probably the reason so few motorists seem to have heard of them is because they're given so many different names, but a PCP, personal contract purchase, it's not really all that complicated. Let's take PCP first and come on to PCH later. A personal contract purchase plan, having put down your deposit the majority of the rest of the loan is then divided up - say 35 monthly payments at relatively low cost with a deferred payment, a balloon payment left until the end of the loan.

LEWIS: So you pay your deposit, you pay each month and then at the end you have to pay another amount of money to secure the vehicle?

MOTTON: That's right. The beauty of it, you're paying a lot less in the regular monthly payments, but there's always this balloon payment waiting at the end. When you come to that final payment you've got three options. You can hand the car back with nothing more to pay, you can pay the final payment and the car is yours, and - this is really what the car manufacturers and dealers want you to do - the final payment is calculated so that it should be less than the car is worth so that you can then use your car as a part exchange, the equity that's left is a deposit towards the next car and so the cycle starts again.

LEWIS: Yes, I must say when I bought a new car these things were explained to me and I tried to do them and I found that the sales people didn't really understand them. Martin Lewis, if you're offered by the dealer zero percent finance, which I must say I was when I took it - thought it was a good deal, is that a good thing to do?

LEWIS: It's a discount. It's as simple as that. It's a discount off the price of the car, and as long as there are no gimmicks like you have to repay it within a certain time and it's not the Dixons as we've just seen example where if you don't pay it back in nine months the interest goes on - it's fine. Just David was mentioning shop around the high street - very quickly to do that for people, if you want unsecured personal loans at the moment - Abbey National for no insurance, no payment protection insurance is the cheapest loan out there at the moment at 7.1% - if you're on the Internet, that's an Internet loan. If not it's Northern Rock. If you do want a loan with payment protection insurance because its insurance is so cheap, even though the interest rate is higher, Intelligent Finance, the phone and Internet bank from the Halifax is the cheapest. They are the cheapest options.

LEWIS: And these are the sort of amounts for buying a car - maybe �10,000?

LEWIS: Well up to �15,000 those loans.

LEWIS: Okay thanks for that Martin. Let's move on now. Let's move on to Jessica who's calling us from Birmingham. Jessica your question?

JESSICA: Hello. I've got an outstanding balance on my credit card of around �4,000 and I also have an overdraft which I'm afraid never seems to disappear which is about �800. What I'm wondering is would it actually pay me to take out an unsecured personal loan and clear both of those two loans off and then obviously just pay you know the loan off over the term of the loan? - would it save me interest?

LEWIS: Well let's talk to Nick Lord. I mean we do see on the television endless advertisements don't we for these consolidation loans. Are they a good idea?

LORD: Often not. I think our experience is in the majority of cases one of the biggest problems that people have with debt is the consolidation debt, and it really is the argument about if you're in a hole stop digging. You don't get advantage by taking out more money to pay your existing debts. Having said that, if you are a consumer who has got the self control to say well what I'm going to do is I'm going to take out a personal loan at a very competitive rate - and I'm sure Martin will tell us what the most competitive rates in just a minute - I'm going to take out that loan over a fixed period, say the next three years, it's going to cost me x amount per month and I'm going to make sure that I don't fall any deeper in debt, and so in three years time I'm going to be out of debt, then that maybe the way to do it. Couple of caveats - if you're a home owner you will find lots of companies who are very willing to lend you money secured against your home - be very wary about that, you're putting your home at risk. And do shop around. You'll probably find that your major high street bank that the bank with whom you have your current account isn't by no means the most competitive lender on personal loans.

LEWIS: And also, if you do take out a loan over a number of years even if it's a fairly short number, you are paying interest on an overdraft which is for something short term - �4,000 on your credit card which you might have used I don't know to buy the groceries or have that holiday and you're spreading that payment over several years and paying interest on it?

LORD: Yes, that's true, but on the other hand you see our experience of consumers who are paying- Jessica's saying she's got �4,000 on a credit card - I won't ask her what she pays every month but it may well be that she's being tempted to make the minimum payment every month. Well if you then project ahead and say how much interest is she going to pay over the next 15 years or so, maybe better to take the personal loan.

LEWIS: Okay, Martin Lewis, I'm sure you've got a slightly different view on this?

LEWIS: Well Nick and I - our philosophy is different. Nick tends to deal with people who are falling outside the system, I'm about playing the system and that's what I did. Jessica which credit card have you got?

JESSICA: It's a Lloyds TSB Trust card.

LEWIS: So okay - that's 17.9% APR that you've got on that at the moment. Now the point is if you were to switch that - there's two ways - do you want the easy to do solution or the better solution?

JESSICA: I want the better solution please.

LEWIS: The better solution is go to the RBS Advanta card until the 1st February 2003 which is zero percent interest for nine months, pay off as much as you can while it's interest free and then rotate again. The easier solution is just move it to Barclaycard at 2.9 interest in perpetuity and you're just saving a ton in interest that way. But always control your spending and never do the purchase on this card. Nick was wrong earlier the Barclaycard option is quite easy for most people. The rotating your balance is difficult but Barclaycard you get that card, you never spend on it and it's 2.9% for the life of the balance.

LEWIS: But Martin that does assume that you have a credit record that enables you to get these new cards and it's not just your credit record is it? - it's your earnings, whether you have a home, how much profit they think they'll make out of you. So in a way you're persuading them they'll make profit and then you're behaving so they don't make any profit?

LEWIS: Yes it's funny. It's the banks who decide whether you're following me in playing the system or you go to Nick when you're playing outside the system you've got problems. They do that by deciding how profitable you are as a customer. Three pieces of information. Your application form is the most important, make sure you fill it out properly. Second, any dealings they've had with you in the past they will use those and third, the information from those credit reference agencies, Equifax and Experian, all the financial transactions, electoral roll, County Court judgements, they put those all into a computer and decide if they want to lend you money.

LEWIS: Okay, maybe more on credit reference agencies in a minute but good advice there for Jessica and let's move on to Vivienne who's in Nottingham. Vivienne your question?

VIVENNE: I just wanted to know what can you do if you take out credit with a company, the goods are faulty and the company won't cancel the credit agreement?

LEWIS: Well I think maybe they have to Nick Lord, is that right?

LORD: Yes, can you we just talk a bit more Vivienne about the goods? Was it a linked transaction? When you took out the credit was it to actually purchase?

VIVIENNE: It was yes

LORD: Okay, well in which case and you borrowed less than �25,000?

VIVIENNE: Yes, much less

LORD: In which case it's covered by the Consumer Credit Act and that means section 75 of the Consumer Credit Act - the lender is equally liable for the supplier of the good in the event that they are faulty. So what you now need to do Vivienne is you can't stop paying, you still have a legal obligation to make the payments under the credit agreement, but what you do do, is you go back to the credit company and you say these goods were faulty, there's a breach of the statutory obligations under the Sales of Goods Act, I haven't been able to get redress from the supplier of the goods, and I now look to you to put it right, and they are under a legal obligation. If they will not help you, go to your local Citizen's Advice Bureau or Trading Standards.

VIVIENNE: Right, we did that. The credit agency said it was the fault of the store. The store don't want to have anything to do with it and Trading Standards will only do something if it's taken to court.

LORD: Absolute rubbish. What you now do is you write to the director general of the Office of Fair Trading and make a formal complaint with regard to the fitness of that credit company to continue to hold a consumer credit license. Take it high within OFT.

LEWIS: And copy that presumably to the company concerned.

LORD: Yes

LEWIS: Okay, and details of how to do that will be on our website or maybe even are already but they certainly will be shortly. Thanks for your question Vivienne. It is a problem isn't it Nick, we talk about rights so often, almost every week - these are your rights, but actually enforcing them can be time consuming and can take a lot of work?

LORD: I think one of the frustrations of us that work in Citizen's Advice Bureau is how easy we find it and the frustration with regard to why should people have to go to CAB or other agency in order to enforce their rights and that's - I'm afraid it's the way that things work.

LEWIS: Well good advice there anyway. Thanks very much for your call. Let's move on now to Cardiff and Annie is waiting to talk to us - Annie?

ANNIE: Hello. I wondered what the best way is to fund a course, including living expenses?

LEWIS: What sort of course Annie?

ANNIE: It's a post grad diploma possibly leading into a masters if I can afford it.

LEWIS: Okay, well let's ask Martin Lewis?

LEWIS: Well first of all you're almost definitely entitled to a career development loan. This is a special loan by the government for people taking vocational courses and a post graduate diploma will almost certainly count for that. What happens is during the time you're studying the government pays the interest for you, so there is no interest charge during the time they're studying, and it only starts a few months after you have finished the course which is very good cos it means you don't have to make any payments during the course, and one of the problems with any form of loan, a credit card has minimum payments, an unsecured personal loan, even the cheapest, you have to make payments straightaway. This way you get the money but you don't have to pay anything during the time you're actually studying, and I'd say that's almost ideal. There are only four banks do it - Barclays do it cos it's a government sponsored scheme - go and have a look up on a website, you'll find details of career development loan -definitely the best way for you to go I'd think.

ANNIE: Well what about living expenses?

LEWIS: It covers living expenses. It's for the course. I think you can get - oh it used to be �8 or 9,000 - it may even have gone up to �10,000. It covers living expenses up to a certain level and the course - as long as it's a vocational course you're eligible for it.

LEWIS: Okay, well that sounds good advice and a good way to fund a one year post graduate course. Annie thanks very much for your call. Let's move now to Billericay where Kim has a question. Kim, your question?

KIM: Yes it's about credit reference agencies. The complete garbage that they write about you is in fact it seems like the make it up as they go along. For instance, I recently, well a couple of years ago applied for some credit and I was told when I got my credit reference - you know the agency document that they send you - I was told that I was actually three different people with two different birth dates, one of which was my ex husband who is now dead. How can lenders take a realistic view of you by looking at a document such as this which is quite clearly not accurate and it is not giving a true statement - I mean for example I've never had CCJs - I've never been taken to court. I was treated like public enemy number one - why is this?

LEWIS: Okay Kim, let's put this to our panel. Nick Lord it is a problem - I mean they do tend to treat the information of credit reference agencies as if it was true and it isn't always accurate?

LORD: There are statistics which show a significant proportion of cases they are inaccurate and that is why Kim and anybody else who has a problem you have statutory rights and what the rights say is that you are entitled to see a copy of your credit reference agency and anybody listening who hasn't got a copy of your credit reference agency you should get one and when you get that you will see the information that is held on you and if that information is incorrect you have the legal right to write back and have it put right and if they won't put it right you have the legal right to put a note of correction on the file which explains your side of the story. So what Kim should do is to immediately write back to them and - and get it put right.

LEWIS: Right, and there are only two credit reference agencies - Equifax and Experian aren't there? - and what do they charge for these documents?

LORD: They charge �2 a time although actually with one of the companies if you make an application through your local CAB - and CAB advisors will hate me for saying this - they don't charge anything at all.

LEWIS: You can also fill it in on line I think on at least one of them but they charge you more for doing that. Martin Lewis, what's your experience of these agencies?

LEWIS: Well I mean I have a lot of sympathy for you. As a man called Lewis who once moved to Cardiff for a year and had everybody who was called Lewis who had previously lived in the same address as me and all their records put on mine - I understand it. What Nick's saying is quite right - you have a right to have it corrected and you should check, I say every 18 months check these forms at least every 18 months. The problem is once you get to the stage where you're writing a note you've already lost the battle cos if you've got to the stage where there's a note on - so go and get proof. They will ask you - can you prove you're not financially linked to this person you've never met and don't know anything about? It's very difficult but fight them and don't give up.

LEWIS: So in Kim's case she might actually have to prove that her late husband is now dead, she might have to prove everything that's wrong to get it correct?

LEWIS: Hopefully it'll all be cleared up the first time. If it isn't cleared up the first time and you think there is an error of fact then keep going. I mean don't go for the note option unless you have to . Try and get it wiped from your record.

LORD: I think that's right. All I'd just say as an aside is talking to people who work for the credit industries, they actually like notes because it explains why someone - it was divorce and I have problems cos my ex husband - it's like a bit of a soap opera, so it can help in those situations.

LEWIS: Yeah, but those notes are for things like why I ran into difficulty but correcting things that are actually wrong you should always be able to get those corrected.

LORD: That's a matter of fact.

LEWIS: Yeah there is a problem though Martin at the moment with the electoral register, the fact that they can no longer use that because of a court case the details of which I won't go into last year?

LEWIS: Yeah it's very difficult and if it's a problem I mean the most important thing we said before application forms and previous dealing with you then credit reference, but in credit reference the most important thing is being on the electoral roll. People who move into this country have a lot of difficulty getting credit because they're not on the electoral roll. It's all about behaviour predicting and how good a risk you are, and they've got to know you're who you say you are. So, it is a bit difficult and if you haven't been on the electoral roll I'm afraid you need to get on it whatever your political persuasions of whether you want to or not to get credit.

LEWIS: Yes but of course even if you're on it - it isn't actually being passed on to the agencies and at least one of them is saying today that you should keep your polling card and maybe use that as proof - send that to them to prove you live where you say. Let's move on now cos time is getting a bit short. Let's talk to Clive in Pocklington. Clive your question?

CLIVE: Hello there. Well basically I bought a new car last September and I took a finance figure of �9007 out. I intended paying it back very quickly and I insured with the people I purchased the car from that there was no hidden penalty clauses for me taking the credit out and paid the money off in March and the actual interest had to pay over six months was over �1,000 in interest.

LEWIS: Right, well that does seem an awful lot and I know we've had a number of calls on this. David Motton, if you do take out a loan over two, three, four years, whatever your do for a car what happens if you do pay it off early?

MOTTON: They do tend to hit you with penalty clauses although Clive you say in this case you were told specifically

CLIVE: Well I actually rung up Citroen and they told me - oh it was front loaded this clause. I said well I wasn't told that. Well we don't tell people unless they ask and I said well how do I know if I don't know about the penalty clause.

LEWIS: So David this is quite common?

MOTTON: It's certainly common that you are going to be hit with a penalty clause yes - whether it's with a hire purchase or PCP - they do prefer you to fill out the full run of the loan, so that in itself is not uncommon.

LEWIS: There's something very subtle going on here and this is the problem. There are redemption penalties when you pay off a loan early. They may say you have to give us two months interest if you pay off the loan early. Those are penalties but also the way the interest is calculated, there's a thing called rule of 78, I'm not going to explain it, it's incredibly complicated, but what it means is the interest charges are front loaded - it's not a penalty, it's the way they calculate how much you've paid of, so if you pay of early most of your payments will have just been going to pay off the interest not the capital, so you'll still owe a large amount, but it doesn't count as a penalty. It's subtle phrasing.

LEWIS: It's the same as a repayment mortgage, you pay off interest first and you pay off the loan.

LEWIS: It's more so cos it's actually loaded heavier - a repayment mortgage is equal, in personal loans - it's loaded.

LEWIS: Okay, so it looks as if there's probably not much you can about that Clive sadly, and it's something to be aware of. You take out a loan, keep paying for the set period of you will end up paying more in the long run. Let's talk to John now in London. John, your question?

JOHN: Oh good afternoon. Being on state benefit, permanent state benefit I find it incredibly hard to borrow money from my high street banks, building societies and therefore have to borrow from far more sort of expensive companies although I have a huge amount of equity in property etc and I just wondered why the high street banks laugh at me.

LEWIS: Alright. May I ask your age John?

JOHN: I'm mid 40s.

LEWIS: Mid 40s okay. Nick Lord this is a problem isn't it? - poor people pay more for credit than rich people?

LORD: It's not at all untypical to see people on benefits or low income paying interest rates of 100 to 500% on an annual percentage rate basis taking us back to the start. The major problem I have to say John is the lack of social lending. You can see if there are organisations in your area who will help such as Credit Unions - you say you live in London I think.

JOHN: But can I repeat you know - I have property equity and as you say I am in the South East of England?

LORD: Okay in which case then there are lenders who will be prepared to lend to you on the basis of your equity. They're called credit impaired lenders. They lend to people who are not able to access credit through the mainstream lenders. What I would say to you John is if you are going to go down that route you must, must make sure that you know what you're getting yourself in for. We see too many people who've taken out loans with impaired credit lenders and then suffered the consequences.

LORD: They like income, they don't like wealth. It's as simple as that. You've got to be able to pay them back on a regular basis and you've got wealth. You've got it in your house. Now if you're going to go down this secured route your house is going to be at risk. I don't know whether it's one property or many. Maybe if you need money and I know it's a radical solution but you may need to think about how to release that equity by actually turning some of that equity into capital, turning it into ready money and not going down this route of borrowing money. It's a drastic solution but it's a lot better than losing your house cos you didn't pay a �10,000 loan off.

LEWIS: Yes and of course that's difficult in your 40s. it's easier when you're in your 60s or 70s.

LEWIS: Yeah you could always sell a property though or a form of property.

LEWIS: Martin Lewis thank you very much. And that's all we have time for so thanks to my guests apart from Martin - Nick Lord from the National Association of Citizen's Advice Bureau and David Motton of 'What Car'. Thanks to you of course for your calls. I'm sorry we couldn't get through to all of you. There's information about today's programme with the Action Line - that's 0800 044 044 Calls are free on 0800 044 044 Our website address: www.bbc.co.uk/moneybox. I'm back at noon on Saturday with MONEY BOX and back here taking your calls live next Monday afternoon with a special bank holiday edition of MONEY BOX LIVE.

BACK ANNO: That was Paul Lewis and the producer was Jennifer Clarke.