Personal Loan APR significantly higher than expected
Discussion
Hello all,
I was hoping you people might have some insight advice for me. I've been looking at buying a car recently, and has settled on taking a personal loan at 5.x% from a provider, and leave the bulk of my savings in my S&S ISA, counting on the 7% average returns I could expect with my money there.
I was looking to borrow £25,000, as this seems to be the limit before APR skyrockets. I've had a mortgage for 6 years (Opened at 60% LTV, now sitting at about 30% LTV), never missed a payment on a phone bill etc. I've had 2 car PCP's since 2015, the last of which ended in late 2021, both of which were for cars with a list price of around £50k. I also have a loan from the Scottish Government to buy a used E.V, £17.5k at 0% APR over 5 years, with 3.5 years remaining, and have no other debt. I have around £35k in savings, and was looking to purchase a car in the low 40s.
Sainsbury's Bank was looking to be the cheapest at 5.7% advertised rate, so I applied online, and was offered 8.9%. Santander, who I have had a 123 Account since 2015 offered me 15.9%
against an advertised rate of 5.9%.
I've never had a credit card, which probably works against me here, and I have an annual salary of £87k, and normally save around £2k a month, so the repayments (around £480p/m projected) weren't going to stretch me.
Would the existing loan really count against me this much in this scenario? I'll be honest I hadn't even thought about it, assuming the application would be painless. It may well be I am just naive with how much the EV loan has impacted my suitability!
I was hoping you people might have some insight advice for me. I've been looking at buying a car recently, and has settled on taking a personal loan at 5.x% from a provider, and leave the bulk of my savings in my S&S ISA, counting on the 7% average returns I could expect with my money there.
I was looking to borrow £25,000, as this seems to be the limit before APR skyrockets. I've had a mortgage for 6 years (Opened at 60% LTV, now sitting at about 30% LTV), never missed a payment on a phone bill etc. I've had 2 car PCP's since 2015, the last of which ended in late 2021, both of which were for cars with a list price of around £50k. I also have a loan from the Scottish Government to buy a used E.V, £17.5k at 0% APR over 5 years, with 3.5 years remaining, and have no other debt. I have around £35k in savings, and was looking to purchase a car in the low 40s.
Sainsbury's Bank was looking to be the cheapest at 5.7% advertised rate, so I applied online, and was offered 8.9%. Santander, who I have had a 123 Account since 2015 offered me 15.9%
against an advertised rate of 5.9%.I've never had a credit card, which probably works against me here, and I have an annual salary of £87k, and normally save around £2k a month, so the repayments (around £480p/m projected) weren't going to stretch me.
Would the existing loan really count against me this much in this scenario? I'll be honest I hadn't even thought about it, assuming the application would be painless. It may well be I am just naive with how much the EV loan has impacted my suitability!
Higher than advertised means you've been classified as higher risk. Could be as you say your limited use of credit facilities and repayment history that is affecting things.
Over the years I've been declined for finance on a £700 laptop then approved on £5k of DJ gear the next week. I've been offered below the advertised rate and double it from the bank I've had a current account with for decades.
I see customers who I wouldn't lend £5 to pass for credit and customers with perfect credit scores which they can evidence be declined in my own businesses.
Over the years I've been declined for finance on a £700 laptop then approved on £5k of DJ gear the next week. I've been offered below the advertised rate and double it from the bank I've had a current account with for decades.
I see customers who I wouldn't lend £5 to pass for credit and customers with perfect credit scores which they can evidence be declined in my own businesses.
I've had this problem every time I've tried to get a personal loan to buy a car, rather than using savings. Sainsbury's, Halifax, Lloyd's, Santander and Nationwide (the last four I have current and savings accounts with) always come back at getting on for double their headline rate. I end up using Tesco each time, and always get their headline rate.
Makes no sense why Tesco are different to all the others in my case.
I own my home outright (current address for 13 years), use credit cards extensively but always pay in full each month, have no other loans, and have never missed a payment in the 48 years since I got my first loan. I get a decent pension income, as well as still working self-employed. I have £30k in savings accounts. My credit score is in the mid 900s.
Someone suggested that paying off the mortgage increased the perceived risk of me defaulting, but clearly Tesco see it differently.
Makes no sense why Tesco are different to all the others in my case.
I own my home outright (current address for 13 years), use credit cards extensively but always pay in full each month, have no other loans, and have never missed a payment in the 48 years since I got my first loan. I get a decent pension income, as well as still working self-employed. I have £30k in savings accounts. My credit score is in the mid 900s.
Someone suggested that paying off the mortgage increased the perceived risk of me defaulting, but clearly Tesco see it differently.
Its worth signing up to Credit Karma or similar to check there is nothing on there that shouldn't be. Either fraud or something marked as a missed payment that is a mistake.
That will also tell you ways to build your credit but I suspect as othernpeople said without much credit in the first place you're a bit of an unknown to the lenders.
Stupidly someone could have half the annual salary in credit card debt but pay it every month and will probably have better access to credit than the OP. Bit of stupid system really.
That will also tell you ways to build your credit but I suspect as othernpeople said without much credit in the first place you're a bit of an unknown to the lenders.
Stupidly someone could have half the annual salary in credit card debt but pay it every month and will probably have better access to credit than the OP. Bit of stupid system really.
It's completely done on credit scoring. So as others have said there is a factor or two working against you . There are ways of checking your own credit score , some mentioned here and some others to be found if you Google it . For that uplift there is something fairly significant.
The deals you mentioned don't sound realistic with 5.25 base now however I can only assume you have a negative factor or two recorded against you .
The deals you mentioned don't sound realistic with 5.25 base now however I can only assume you have a negative factor or two recorded against you .
Thanks for the input everyone. I did try Tesco Bank, but was offered 14.4% APR. It turns out though I had a CreditKarma account from yonks ago, and whilst there is no record of my EV loan (perhaps coming via the government means it is not registered on privately credit information), my lack of credit history was flagged as being a high impact on my score. A credit limit of over £4000 was suggested as the remedy. It is certainly frustrating, but understandable that my lack of steady credit use blocks me from large credit use. I suppose by the time, if I began using a credit card, for any changes on my credit to be reflected, I could have saved a good chunk of the money I was looking for anyway.
You live and learn I suppose!
You live and learn I suppose!
The no credit card thing has bitten me before I cut through the only one I've ever had 20 years ago. I saw an offer of 0% on a watch a year or two back and got refused finance for it. Now I'm not going to go into personal details but I'm solvent. This got me into full panic mode I thought something bad might have appeared on my credit file (which I'd never checked before!)
I got an Experian account and there was absolutely nothing on there and just about the highest credit rating. I still have no idea why that refused the finance the only thing I could think is not having a credit card maybe they think I'm a risk for early repayment or something like that? I remember now with that watch I actually tried with two different suppliers using different credit brokers and got the same result! My back suggested the lack of credit card specifically some lenders don't like. We have the virtual stuff like mortgages/car finance coming out of our ears hehe the panic!
I got an Experian account and there was absolutely nothing on there and just about the highest credit rating. I still have no idea why that refused the finance the only thing I could think is not having a credit card maybe they think I'm a risk for early repayment or something like that? I remember now with that watch I actually tried with two different suppliers using different credit brokers and got the same result! My back suggested the lack of credit card specifically some lenders don't like. We have the virtual stuff like mortgages/car finance coming out of our ears hehe the panic!
p4cks said:
Banks only need to offer the lower rate to a small proportion of customers to be able to advertise it, the vast majority get the higher rate. It's effectively a con.
50% IIRC. Once they have filled that quota they can offer higher rate to everyone.I think a few things working against you OP.
Existing large ish loan.
Multiple applications recorded on your credit file.
Recent increases in base rates and possible future increases.
I also think the loan industry is a bit jittery right now. We are in the middle of an economic wobble, and in theory it will just fade into the distance and all be over with in a year but there is a chance of a 2007 type crash which would mean lenders would lose a lot of money over the next few years.
Given you have the cash, I would just use that. There is no way I would be paying 10%+ in interest on 25k.
Jasey_ said:
If they think he's a risk they shouldn't be offering him more expensive loans - they should be telling him he can't afford it and go away.
It's f
king profiteering - pure and simple.
It isn't. You can swear and state 'pure and simple' after the statement, but that doesn't make it so.It's f
king profiteering - pure and simple.I have recently been helping a friend do this after my wife and I experienced something similar.
The mistake my wife made is reference to mortgage payments, she answered £1000 say when actually that’s what the payment is, not what she contributes.
We have a melting pot we pay into and bills come out of, the direct debit is in my name so we changed it to say £200. Could have put nothing, they didn’t ask what total expenditure was just what we have direct debits for. Reality is she has most of the bills in her name so that’s how it naturally lies anyway.
This made the apr more sensible and advertised rate. A friend had the same experience and the same outcome. Of course if I was to apply for a loan i would say I pay all of it, especially if it was with the same lender.
I’m not suggesting you lie of course, but in their situations it was fully reasonable as the mortgage DD were not in their name.
The mistake my wife made is reference to mortgage payments, she answered £1000 say when actually that’s what the payment is, not what she contributes.
We have a melting pot we pay into and bills come out of, the direct debit is in my name so we changed it to say £200. Could have put nothing, they didn’t ask what total expenditure was just what we have direct debits for. Reality is she has most of the bills in her name so that’s how it naturally lies anyway.
This made the apr more sensible and advertised rate. A friend had the same experience and the same outcome. Of course if I was to apply for a loan i would say I pay all of it, especially if it was with the same lender.
I’m not suggesting you lie of course, but in their situations it was fully reasonable as the mortgage DD were not in their name.
If you've not had a history of credit, plus are simply looking to take a comparatively low rate finance product, I suspect you'll be seen as an unattractive customer by the bank.
Not due to risk, but simply not very profitable.
After all, the bank will have its own profitability targets to meet.
May be as simple as that.
Not due to risk, but simply not very profitable.
After all, the bank will have its own profitability targets to meet.
May be as simple as that.
iphonedyou said:
Jasey_ said:
If they think he's a risk they shouldn't be offering him more expensive loans - they should be telling him he can't afford it and go away.
It's fking profiteering - pure and simple.
It isn't. You can swear and state 'pure and simple' after the statement, but that doesn't make it so.It's f
king profiteering - pure and simple.Gassing Station | Finance | Top of Page | What's New | My Stuff