The Citizens Advice Bureau (CAB) has encouraged lenders to make the details and terms of loans clearer to borrowers to prevent people racking up bad or unmanageable debts.
Moira Haynes from the CAB argues that because the credit market "has expanded greatly and become very complex", consumers need more guidance than ever before.
"Lenders should make it clear to customers what they are committing to," Ms Haynes said. "It can be hard to understand the details and the small print."
In order to stop people from getting into debt to the extent that they are unable to meet repayments, loans companies should help customers to understand their agreements and the implications of them, she said.
If people are given greater guidance with their finances, it will result in fewer missed payments and debt problems, which will aid all consumers in the long run by decreasing overall interest rates.
Such a move would also benefit lenders by reducing the likelihood of making a loss on loans that may not get repaid in full if the borrower cannot meet their commitments.To read more about loans, click here.
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