Kerry Regan – Responsible Manager
A responsible lender tries to make everything as simple and transparent as possible. A responsible debtor does the same. It is in both parties’ interests to be honest and clear with each other. So, let’s look at what is involved with Direct Debits and Direct Credits and the basic differences.
A direct debit is organised by the lender. A direct Credit is organised by the borrower. They both do the same thing, they automatically move money from the borrowers account to the lender.
A Direct Debit is supplied by the lender. You are presented with a standard form with the consumer requirements, your bank details and ready for you to sign. Attached will be the terms and conditions with the payment schedule.
If you give a lender the authority to Direct Debit your payments, you are allowing them to take money from your account, with conditions. There are many laws and regulations that protect you from unlawful use of this facility.
The lender usually uses a third-party company to arrange the funds transfer via your bank and deposit your repayments into their bank, all in accordance with your repayment schedule. There is trust in giving this authority to the lender, but it does not give the borrower the ability to withdraw any funds at any time, they must stick to the schedule and there are serious consequences for breaching that trust.
Direct Debit passes the responsibility to the lender and eliminates the worry of missing a payment by mistake. With Direct Debits, you need to make sure there is enough money in the account for the withdrawal. If there isn’t enough money, you will receive a default notice and a fee for re-ordering the missed payment requested.
Direct Debit is the most common way of transferring funds on a regular basis between accounts. Although, some people choose to set up an automatic Direct Credit. You can go to your own bank and organise a Direct Credit yourself. This gives you control over the information you give the lender and limits the ability for the lender to take monies when they are not due. But, it means you need to go to the bank to set up the facility. Then you need to remember to cancel the authority when you have finished the loan, something that a lot of people forget.
Last of all, you can simply go to the bank and pay each payment across the counter. But unless you have good reason, this is a very inefficient method of paying your loan. Many things can go wrong, like your inability to get to the bank if you are sick. But some people still make the trip each time there is a payment due.
Many of us become confused and try to over complicate things. Direct Debiting is by far the simplest, most convenient and efficient way to repay your loan, millions of transactions happen each day.
We hope this article enables you to make an informed decision.