When I was thinking about buying the sofa I found out that there are lots of things to think about when taking out credit. But first I had to decide did I really need it? Could I save up for it, or was there a cheaper option? I learnt that if you do want to use credit, you need to look at two things: APR and loan length.

APR: The higher the APR the more you will pay back.

APR stands for Annual Percentage Rate. This is how much you are charged to borrow money each year. It is made up of interest (what you pay for using the borrowed money) and fees. To compare the cost of credit - paid back over the same time period - a loan with a low APR is cheaper than one with a higher APR.

Length of Loan: The longer you borrow money for, the more money you will pay back.

The cost of credit will also depend on the number of payments you make and over how long. A loan at a lower APR paid back over three years may cost more than a loan for the same amount at a higher APR paid back over one year. Be sure to check out how much you will pay in total.

When you take out a loan make sure you check what APR the company is offering you – it does not have to be the same APR as they advertised on the TV, internet etc. So check what the fees actually are! Are you being charged just to apply for a loan? Are you being sold any insurance you don’t need?

There are no credit ratings or ‘black lists’ for credit. But if you have a poor credit history you will have fewer choices about what credit (APR) you can get.

The www.moneysavingexpert.com website has a section that tells you how to find out what your credit rating is. And remember — don’t sign any agreements without understanding them. You can take an agreement away to get advice if you need to, in that way you really will be a savvy shopper!