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Here is a little…..dare I say scam...that lenders seem to be employing to get more money out of borrowers and all without having to worry about explaining themselves.
All comparison websites list the best available loan rates be it for car finance, unsecured personal loans etc. At the moment Sainsburys bank seem to be topping many of these sites with an advertised rate as low as 3.1%APR. According to the websites this includes debt consolidation. Grand, lovely, you think as you see your credit card provider is charging you 29.9% and you have little hope of paying the balance off in the foreseeable future.
So you apply for a loan to pay off your credit card and reduce the amount of interest you are paying by more than 26%. Smart move.
The credit search is done and you are approved and we all know that you now have a search on your credit file but you have been approved so no worries but…..when the paperwork arrives you discover you will be paying closer to 10% APR. Now fair enough, not all applicants will have a perfect credit score or meet the exacting criteria to qualify for the 3.1% rate but when people with perfect credit scores, sound backgrounds and good income are being told they have to pay two,three and even almost 4 times the advertised rate something starts to smell. The lenders refuse to adequately explain why this is and hide behind the ‘at least 51% of borrowers get the advertised rate’ claim but do not have to back up or explain this any further.
Apparently it is perfectly legal to allow you to apply, mark your CRA with a search and then when you are about to sign the agreement sting you with a much, much higher rate.
Borrowers are spanceled because they already have the ‘stain’ of a search on their file which actually reduces their eligibility to get the best rate from an alternative lender.
My advice, when applying for a loan is -by all means make note of the best rates but no matter what your circumstances do not expect to get them. Then do some research and you will discover the lenders offering the lowest rates are the biggest offenders. Many of the so called ‘reputable’ lenders have been doing this for quite some time. Sainsburys seem to be the greatest culprits over the last few months and coincidentally have been advertising the lowest rates. (Sarcastic, Moi?!!!)
All comparison websites list the best available loan rates be it for car finance, unsecured personal loans etc. At the moment Sainsburys bank seem to be topping many of these sites with an advertised rate as low as 3.1%APR. According to the websites this includes debt consolidation. Grand, lovely, you think as you see your credit card provider is charging you 29.9% and you have little hope of paying the balance off in the foreseeable future.
So you apply for a loan to pay off your credit card and reduce the amount of interest you are paying by more than 26%. Smart move.
The credit search is done and you are approved and we all know that you now have a search on your credit file but you have been approved so no worries but…..when the paperwork arrives you discover you will be paying closer to 10% APR. Now fair enough, not all applicants will have a perfect credit score or meet the exacting criteria to qualify for the 3.1% rate but when people with perfect credit scores, sound backgrounds and good income are being told they have to pay two,three and even almost 4 times the advertised rate something starts to smell. The lenders refuse to adequately explain why this is and hide behind the ‘at least 51% of borrowers get the advertised rate’ claim but do not have to back up or explain this any further.
Apparently it is perfectly legal to allow you to apply, mark your CRA with a search and then when you are about to sign the agreement sting you with a much, much higher rate.
Borrowers are spanceled because they already have the ‘stain’ of a search on their file which actually reduces their eligibility to get the best rate from an alternative lender.
My advice, when applying for a loan is -by all means make note of the best rates but no matter what your circumstances do not expect to get them. Then do some research and you will discover the lenders offering the lowest rates are the biggest offenders. Many of the so called ‘reputable’ lenders have been doing this for quite some time. Sainsburys seem to be the greatest culprits over the last few months and coincidentally have been advertising the lowest rates. (Sarcastic, Moi?!!!)
