Financing interest rates - inconsistencies and questions
Discussion
Hi all,
Part-time lurker and first time poster here (I think I have the correct sub-forum but please correct if necessary)
I've been looking at financing a motorcycle to commute with and potentially a car, looking at the possibility of buying a 370Z again or maybe a 996/997.
In such a scenario, as I'm going to soon be purchasing a property, I'd prefer to use a loan to finance the vehicle. This is where my questions begin.
I'll update on my background in finance shortly, but to start with, the issue I'm facing is that the advertised APRs don't make any sense.
I'll use Lloyds as an example; they advertise 3.8% APR within certain lending criteria (7k + up to something like 25k) and 3.9% on a personal loan for the same values (roughly). Now explaining away the 0.1% deficit is easy as it's driven by one loan commitment being secured and the other unsecured. No surprises, low interest rate environment, etc.
Now the complication, if I actually log in an get a quote I'm lucky to see under 11%. That's like Prime +10% on financing. It's more than double the advertised rate.
This wouldn't bother me if I was some young hotshot with a poor record, however I've worked in finance for 10 years, always been very conservative financially, and have built the very kinds of pricing models used on facilities like these. I used to live in another country for a number of years and frequently got financing at rates below Prime. Never defaulted, solid credit score, etc etc etc. You get the picture.
Now what gripes me is that no one seems to be able to explain the pricing differential to me from the bank. I explained to them I'm able to understand in intricate detail but they appear not to have the information available to divulge on how their credit and pricing model is actually determining the generated rates and what the principle components are that are deriving the values.
I was wondering if 1) anyone else has had such bizarre experiences? and 2) who else you've been using for financing that have seemed to have a more sensible grasp.
Thanks in advance
Part-time lurker and first time poster here (I think I have the correct sub-forum but please correct if necessary)
I've been looking at financing a motorcycle to commute with and potentially a car, looking at the possibility of buying a 370Z again or maybe a 996/997.
In such a scenario, as I'm going to soon be purchasing a property, I'd prefer to use a loan to finance the vehicle. This is where my questions begin.
I'll update on my background in finance shortly, but to start with, the issue I'm facing is that the advertised APRs don't make any sense.
I'll use Lloyds as an example; they advertise 3.8% APR within certain lending criteria (7k + up to something like 25k) and 3.9% on a personal loan for the same values (roughly). Now explaining away the 0.1% deficit is easy as it's driven by one loan commitment being secured and the other unsecured. No surprises, low interest rate environment, etc.
Now the complication, if I actually log in an get a quote I'm lucky to see under 11%. That's like Prime +10% on financing. It's more than double the advertised rate.
This wouldn't bother me if I was some young hotshot with a poor record, however I've worked in finance for 10 years, always been very conservative financially, and have built the very kinds of pricing models used on facilities like these. I used to live in another country for a number of years and frequently got financing at rates below Prime. Never defaulted, solid credit score, etc etc etc. You get the picture.
Now what gripes me is that no one seems to be able to explain the pricing differential to me from the bank. I explained to them I'm able to understand in intricate detail but they appear not to have the information available to divulge on how their credit and pricing model is actually determining the generated rates and what the principle components are that are deriving the values.
I was wondering if 1) anyone else has had such bizarre experiences? and 2) who else you've been using for financing that have seemed to have a more sensible grasp.
Thanks in advance
Edited by Mr_Megalomaniac on Monday 1st October 19:49
Are you a homeowner?
On the electoral roll?
Foreign address history in the last 6 years?
What percentage of your annual income are you trying to lend?
How long have you been with your employer?
How many loans and credit cards have you had in the last six years? How many mortgages?
Just a tiny sample of the dozens of variables that go into decision making.......
On the electoral roll?
Foreign address history in the last 6 years?
What percentage of your annual income are you trying to lend?
How long have you been with your employer?
How many loans and credit cards have you had in the last six years? How many mortgages?
Just a tiny sample of the dozens of variables that go into decision making.......
foiled said:
They won't divulge their lending criteria, so just look for a loan somewhere else.
Sainsbury's Bank have always declined me for their credit card, yet Amex, MBNA, Tesco are happy to give me £15k+ credit limits, just one of life's little mystery's
They won't/can't divulge it because the people answering the phones simply don't know the answer.......people way above their pay grade will be the people tweaking the acceptance algorithms based on their lending appetite at any given time......Sainsbury's Bank have always declined me for their credit card, yet Amex, MBNA, Tesco are happy to give me £15k+ credit limits, just one of life's little mystery's
NRS said:
How big an issue is being out of the country for the past 6 plus years for a mortgage?
Some lenders will auto decline applications with foreign address.........it depends when it was and the details as a whole.......for example Nationwide will decline where there has been any foreign address history in the last three years......Sarnie said:
Are you a homeowner?
On the electoral roll?
Foreign address history in the last 6 years?
What percentage of your annual income are you trying to lend?
How long have you been with your employer?
How many loans and credit cards have you had in the last six years? How many mortgages?
Just a tiny sample of the dozens of variables that go into decision making.......
Firstly thanks all for the replies; helpful to get some additional knowledge on this. I can see what you're saying as well with regard to multiple factors, although interestingly these are less finance related and more consumer behaviour related. It's almost like they're pricing in mistrust to an extent On the electoral roll?
Foreign address history in the last 6 years?
What percentage of your annual income are you trying to lend?
How long have you been with your employer?
How many loans and credit cards have you had in the last six years? How many mortgages?
Just a tiny sample of the dozens of variables that go into decision making.......
On those questions as a quick summary given how I noted I thought the doubling+ of interest rate was perverse:
Soon to be homeowner (therefore not yet)
Yes on the electoral roll
Yes foreign address in the last 6 years
Trying to borrow ~9% of my annual income
With employer just over 3.5 years
Zero UK-based credit in the last 6 years (I could ask what credit history they'd like from abroad but unsure if they'd consider it relevant)
I'll happily update everyone after I meet them in person, but I suspect that as indicated by Sarnie, they either can't/won't explain it as the pricing analysts and modellers wouldn't have provided such information to branches. Maybe I can just see what personal factors they've considered.
Cheers all
Mr_Megalomaniac said:
Firstly thanks all for the replies; helpful to get some additional knowledge on this. I can see what you're saying as well with regard to multiple factors, although interestingly these are less finance related and more consumer behaviour related. It's almost like they're pricing in mistrust to an extent
On those questions as a quick summary given how I noted I thought the doubling+ of interest rate was perverse:
Soon to be homeowner (therefore not yet)
Yes on the electoral roll
Yes foreign address in the last 6 years
Trying to borrow ~9% of my annual income
With employer just over 3.5 years
Zero UK-based credit in the last 6 years (I could ask what credit history they'd like from abroad but unsure if they'd consider it relevant)
I'll happily update everyone after I meet them in person, but I suspect that as indicated by Sarnie, they either can't/won't explain it as the pricing analysts and modellers wouldn't have provided such information to branches. Maybe I can just see what personal factors they've considered.
Cheers all
Soon to be homeowner (therefore not yet)On those questions as a quick summary given how I noted I thought the doubling+ of interest rate was perverse:
Soon to be homeowner (therefore not yet)
Yes on the electoral roll
Yes foreign address in the last 6 years
Trying to borrow ~9% of my annual income
With employer just over 3.5 years
Zero UK-based credit in the last 6 years (I could ask what credit history they'd like from abroad but unsure if they'd consider it relevant)
I'll happily update everyone after I meet them in person, but I suspect that as indicated by Sarnie, they either can't/won't explain it as the pricing analysts and modellers wouldn't have provided such information to branches. Maybe I can just see what personal factors they've considered.
Cheers all
Yes foreign address in the last 6 years
Zero UK-based credit in the last 6 years
^^These are your problems that are making you higher risk............you don't own your own property..........renters move a lot........you've no commitment to the property you live in......they could lend you funds, you move and try to hide from the debt.......this is significantly less like to happen with home owners.
Foreign address history......this is like a black hole to a UK lender........there's no way for them to search or use credit history from outside of the UK....who knows what you were doing then........running up debts in a foreign country perhaps?
Zero UK based credit history........this is probably your biggest problem........they have no idea who you are.......have no track record of your obtaining and maintaining debt and have no confidence in how you'll behave when you do. No credit history is one rung up from having adverse credit history......I often see clients who are pleased to tell me that they've never had a loan, credit card or needed any form of credit, which is of course amazing, but in todays society thats not the norm........and when you are asking a lender to lend you hundreds of thousands for a mortgage, they struggle to be able to how the client will behave once they have a huge debt........
You may think you are a good client and a low risk........but the decisioning systems will be interpreting the above data negatively and will decline or accept you, but not at the prime lowest rates, which are reserved for people that don't have the above markers against them.........
Might be worth applying for a 0% card / balance transfer to account type thing...it'll also help build up your UK credit history, which will then help you in the long run.
It'll be helpful even if you're just regularly using it and clearing it down, it'll all add to build up your positive credit history.
It'll be helpful even if you're just regularly using it and clearing it down, it'll all add to build up your positive credit history.
As others have stated you need to build a credit history in this country. Assuming your salary is paid into a UK bank account and that isn't Monzo or a similar start up then get a credit card from them and use if but pay it off every month. Make sure utility bills are in your name, make sure you are on the electoral role.
You could try one of the P2P lenders but I am afraid your chances of getting a headline grabbing rate are low.
You could try one of the P2P lenders but I am afraid your chances of getting a headline grabbing rate are low.
If you’ve worked in Finance for ten years, have always been conservative, and you need less than 10% of your salary could you not just use some of your emergency funds or save up for a couple of months?
Taking your buffer down for a few months is not an issue when you’ve got something that you can sell should you need to replace the funds.
Taking your buffer down for a few months is not an issue when you’ve got something that you can sell should you need to replace the funds.
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