How can a bank decide your Apr according to your means?
Discussion
I looked into a Sainsbury's Bank loan over the weekend as they're advertising a 2.9% APR. It turns out that rate could actually be as much as 25% depending on your application form answers. How does that work legally then as it sounds discriminatory to me? Will they be deciding how much I pay for a packet of biscuits next according to my wealth?
bernhund said:
I looked into a Sainsbury's Bank loan over the weekend as they're advertising a 2.9% APR. It turns out that rate could actually be as much as 25% depending on your application form answers. How does that work legally then as it sounds discriminatory to me? Will they be deciding how much I pay for a packet of biscuits next according to my wealth?
As above. The advertised rate will be a "typical" one, not a guaranteed rate. The better you score on risk, the lower the rate will be. If you a high risk borrower (eg previous defaults or late payments) then the rate will be hiked to reflect that risk. You are not forced to take the rate if you don't like it.The result will be interesting then. We applied in my wife's name and apart from our mortgage, she has only ever had car finance, store and credit cards. The cards are reliably paid in full each month. Whereas I've had loans and cards all my working life. There's been the occasional late payment due to being self employed, but never a missed payment. Might have had more chance of the 2.9 in my name.
hyphen said:
You appear quite proud of having loans/cards/storecards and general debt all your life...You and your wife are financially linked by the way, so when your wife applies they will take you into account.
What are you borrowing to buy now if not too personal.
What a peculiar response! Where did that come from? Proud? Just because I've borrowed? Did you never buy a house? What are you borrowing to buy now if not too personal.
I'm sat on about £1.2m of property and owe about £250k. That's through borrowing and critically, living too.
Let us know if you do get the headline rate. Interesting to know how they work this out do they see you as able to manage the debt your have open to you and therefore low risk, are you deemed high risk due to self employment, is the mortgage and the whopping equity taken into account? Only the computer really knows.
bernhund said:
What a peculiar response! Where did that come from? Proud? Just because I've borrowed? Did you never buy a house?
I'm sat on about £1.2m of property and owe about £250k. That's through borrowing and critically, living too.
Nothing wrong with sensibly borrowing money as needed, was more your "I've had loans and credit card debt my whole working life" that stood out. Came across that you borrow money non-stop impulsively. I'm sat on about £1.2m of property and owe about £250k. That's through borrowing and critically, living too.
So don't have a go at me if you phrase it wrong, I can't read between the lines on the internet you see
Good luck with the application.bernhund said:
I looked into a Sainsbury's Bank loan over the weekend as they're advertising a 2.9% APR. It turns out that rate could actually be as much as 25% depending on your application form answers. How does that work legally then as it sounds discriminatory to me? Will they be deciding how much I pay for a packet of biscuits next according to my wealth?
Not if you pay upfront for the biscuits. Because there's no risk to the bank.If, OTOH, you asked to take the biscuits away and promised to repay 1p per month over 25 years, they'd have to look at your job, your income, and your history for defaulting on biscuit packets.
It's actually a good thing that they use a risk based approach. it means that you're not paying for people who are a bad credit risk.
bernhund said:
I looked into a Sainsbury's Bank loan over the weekend as they're advertising a 2.9% APR. It turns out that rate could actually be as much as 25% depending on your application form answers. How does that work legally then as it sounds discriminatory to me? Will they be deciding how much I pay for a packet of biscuits next according to my wealth?
It is discriminatory, but there are certain criteria, I think, for which they legally can't adjust the pricing (race being the biggest one).It's fairly simple........the APR offered is in direct correlation to the risk that they interpret that you represent............into that will be how long you've lived at your address, are you on the electoral roll, current credit utilisation, are you a home owner, how long have you been employed, previous credit repayment history, amount applied for in relation to your income, what other credit commitments do you have, number of financial dependants.........the list goes on but all contribute to your scorecard and likelihood of being accepted and then at what APR.......
BoRED S2upid said:
Let us know if you do get the headline rate. Interesting to know how they work this out do they see you as able to manage the debt your have open to you and therefore low risk, are you deemed high risk due to self employment, is the mortgage and the whopping equity taken into account? Only the computer really knows.
I'll let you know what's on offer. We don't need the loan, but saw it as an opportunity to have a few quid hanging around for likely expenses that could be around the corner. We'll simply turn it down if the figure is silly.barryrs said:
Without going into any detail I received the 2.9% rate recently so I dont think its just a headline grabber.
Yeah, it has be a demonstrably typical rate offered to met regulators requirements. They can't just advertise it as a headline rate that practically no one qualifies for.hyphen said:
bernhund said:
What a peculiar response! Where did that come from? Proud? Just because I've borrowed? Did you never buy a house?
I'm sat on about £1.2m of property and owe about £250k. That's through borrowing and critically, living too.
Nothing wrong with sensibly borrowing money as needed, was more your "I've had loans and credit card debt my whole working life" that stood out. Came across that you borrow money non-stop impulsively. I'm sat on about £1.2m of property and owe about £250k. That's through borrowing and critically, living too.
So don't have a go at me if you phrase it wrong, I can't read between the lines on the internet you see
Good luck with the application.Anyway, not to worry. Just misunderstandings.
I came up against this with Lloyds last year. An "offer" of a loan at 3% came up when I had logged on to my account. I assumed that this would be a personalised offer, as it only appeared after I had logged on.
As it happens, I was about to buy a car, and wanted to borrow £10k, rather than take it out of my savings. When I applied online, they wanted to charge me 7.9%. This was despite having what I thought was a decent credit rating. Mortgage-free, £30k in the bank, plenty of credit card usage (but always paid off), low income from working 2 days a week, but a decent pension income plus some self-employment.
What really wound me up was a friend of mine who lives on benefits (wife and teenage son both registered disabled, he is their carer) applied at the same time, and was approved at 2.9%. He didn't take the loan, as there was no way he could afford the repayments. He has zero savings, no credit card of his own, and they live in rented property. Surely he is a worse credit risk than me?
I complained to Lloyds. They couldn't explain why I would have to pay such a relatively high interest rate. They just said that the headline rate was what a certain percentage of applicants would get.
I went with Tesco instead. No problems getting the headline 3% rate.
Unfortunately I'm stuck banking with Lloyds, as they will soon be the only viable bank left in my local town (not going to "risk" Natwest!), and I need to be able to pay in the cash and cheques I earn from self-employment.
As it happens, I was about to buy a car, and wanted to borrow £10k, rather than take it out of my savings. When I applied online, they wanted to charge me 7.9%. This was despite having what I thought was a decent credit rating. Mortgage-free, £30k in the bank, plenty of credit card usage (but always paid off), low income from working 2 days a week, but a decent pension income plus some self-employment.
What really wound me up was a friend of mine who lives on benefits (wife and teenage son both registered disabled, he is their carer) applied at the same time, and was approved at 2.9%. He didn't take the loan, as there was no way he could afford the repayments. He has zero savings, no credit card of his own, and they live in rented property. Surely he is a worse credit risk than me?
I complained to Lloyds. They couldn't explain why I would have to pay such a relatively high interest rate. They just said that the headline rate was what a certain percentage of applicants would get.
I went with Tesco instead. No problems getting the headline 3% rate.
Unfortunately I'm stuck banking with Lloyds, as they will soon be the only viable bank left in my local town (not going to "risk" Natwest!), and I need to be able to pay in the cash and cheques I earn from self-employment.
Thanks for your input on this post.
So having been accepted in principle by email and told that the APR would be more than 2.9%, my wife then received another email requesting she called them today. They wanted to clarify our address and on doing so then told her the application has been accepted at 2.9% fixed for 5 years. Great news indeed.
The figures for your information will be for borrowing £20k. That works out at £21,489 of which the monthly interest is a paltry £24.82 of the £358.15 direct debit we'll set up to cover the 60 months.
So having been accepted in principle by email and told that the APR would be more than 2.9%, my wife then received another email requesting she called them today. They wanted to clarify our address and on doing so then told her the application has been accepted at 2.9% fixed for 5 years. Great news indeed.
The figures for your information will be for borrowing £20k. That works out at £21,489 of which the monthly interest is a paltry £24.82 of the £358.15 direct debit we'll set up to cover the 60 months.
bernhund said:
Thanks for your input on this post.
So having been accepted in principle by email and told that the APR would be more than 2.9%, my wife then received another email requesting she called them today. They wanted to clarify our address and on doing so then told her the application has been accepted at 2.9% fixed for 5 years. Great news indeed.
The figures for your information will be for borrowing £20k. That works out at £21,489 of which the monthly interest is a paltry £24.82 of the £358.15 direct debit we'll set up to cover the 60 months.
Well done. That's a good rate.So having been accepted in principle by email and told that the APR would be more than 2.9%, my wife then received another email requesting she called them today. They wanted to clarify our address and on doing so then told her the application has been accepted at 2.9% fixed for 5 years. Great news indeed.
The figures for your information will be for borrowing £20k. That works out at £21,489 of which the monthly interest is a paltry £24.82 of the £358.15 direct debit we'll set up to cover the 60 months.
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