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This is a question we have been asked many times. Why do I not get the rate which I saw advertised by a lender. This is generally across all types of lenders, regardless of whether you are applying for a personal loan, or mortgage, car loan or online payday loan.
You would think that having the best credit score, owning your own home, having a well-paid job would give you access to the best loan rates, right? And it comes as a slight shock to most people when they are offered a loan where the APR is nothing like the APR advertised by the lender.
Let’s investigate why this is.
There are many articles and posts on money blogging sites like “This is Money” and “Money supermarket” where people go to recant their tales of how they were promised one thing but were delivered another. There is a story of a lady who was in a well-paid job, owned her own home, had the perfect credit score and was offered 209% as opposed to 11.9% as advertised by the card provider.
Another case of a business owner who like the above example had a perfect credit score, was a company director and was offered a loan for £40,000 at 12% rather than the advertised rate of 6.5%.
You would presume that in all probability that the lenders would be falling over themselves to lend these people money. They are sure bets when it comes to paying back the loan, they can afford it, they have assets in the form of their homes.
So as lower risks they should be offered the better rate. Having a lower or poorer credit score should mean a higher interest rate therefore it would an incentive to those with lower scores to improve their credit rating.
The examples you see presented to applicants will only be available to 51% of people. The other 49% of applicants will receive some other rate. This rule is backup up by the E.U Consumer Credit EU Directive.
This directive allows lenders to publicise the rate which 51% of people get. This may seem like it is miss-leading the consumer but you have to take into account that the example shown on the website or marketing literature is “representative”, as in it is an example of what you could get as a rate but will not necessarily be the rate you will get.
When you read the example given it will always state that this is the “typical APR”, this typical ARP is what is offered to at least 66% of applicants.
The rate which you will be offered is dependent on the lender, and their criteria, the amount of the loan, the duration of the loan. You will find that short term loan APR rates are quite high compared to traditional loans, this is in part due to the short duration of the loan which the lender expects to be paid back in months rather than years.
Your credit scores
There will always be instances like the example you will read about on money blogs that tell of situations where someone with a perfect track record and a lenders dream borrower will get a higher rate than they should, this maybe down to the affordability checking systems some lenders operate skipping a beat. If you have checked your credit rating and are positive that you have been offered a poor deal you have choices.
The first is to contact the lender and ask them to reconsider and offer you a lower rate
Secondly, do not take the loan and go else where
Thirdly, take the loan at the rate offered.
It is normal for people with good credit rating to be offered the best deals.
When you call your lender to ask them about the discrepancy between the rate you have been offered compared to the rate advertised, they will most probably tell you that the rate you were offered was calculated during their affordability checks.
They compute the affordability checks but looking at all your monthly income versus your monthly outgoings. The lender needs to see how much debt you already have and how much you can afford to pay back.
They may also ask to see a bank and credit card statements to decide for higher lending amounts.
If the lender considers that you have many outgoings, mortgage, rent, food bills, car loans then it is natural that the lender will not offer their best rate as you present a higher risk to them.
As a long-time customer, you expect your loyalty to be rewarded. When a lender sees that you always repay on time every time, they are more likely to offer you the best rates so that you do not go elsewhere.
The lender is comfortable in lending to you as you have history. This also applies to borrowing money from the bank. They can see your financial track record there and then. If you can apply for a loan directly from your local bank rather than going to a third party, it might just save you a few quid.
The FCA has made payday lenders to be more transparent and approachable. They expect all lenders to be contactable by their customers should they have any questions, issues or problems. If you have been offered a rate which you do not accept simply pick up the phone and give them a call. If you have been rejected for a loan, they must tell you why, although not immediately but they do have to tell you via the EU Directive who will write to you.
Cashute is Regulated by The Financial Conduct Authority
Many people in the U.K struggle with debts and many do not know how to start to repay them speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.
https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk
You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice