Michael Challiner

Lucky dip for loan applicants

Huge problems with debts in the UK have resulted in a tightening of loan procedures. The new “personal pricing” which many banks have adopted may prove something of a headache for borrowers.

Things are not looking too rosy on the loans front. It appears that there are huge problems with debt in the UK. Banks are increasingly nervous about the state of things and feel that lending is risky at present as a result of this. The result is an increasing number of rejections of loan applications.

Most of the major banks have taken the decision to introduce a new process, called “personal pricing”, which involves the matching of the rate offered to the result of your credit investigations. If you have an excellent credit rating you’ll receive the optimum loan offer and conversely a poor rating will cost you more in interest, or even result in your application being rejected.  Whilst this sounds a perfectly logical decision, it’s going to prove difficult for consumers, who will have trouble in choosing the most suitable lender if they’re not aware of the interest rate they’re likely to be offered.

There could be problems though, if having gone through the application procedure, the rate on offer is too high. If you reject the deal you risk your credit record being damaged. Each time you make an application for a loan, a “footprint” will be left on your file. A number of these will make loan companies very wary of offering credit. It’s probably most likely that your own existing bank will be able to arrange a loan, although it is probably not going to be as competitive as other deals on offer on the market. High street banks are not known for offering the best rates.

Many people use comparison tables, via websites, to find the cheapest lenders. Obviously the companies using the personal pricing method can’t be included in the tables as they don’t publish a typical rate. Of the banks that still use headline rates in their advertising, lenders are refusing loans for high proportions of applicants and the successful applicants are being offered loans at a higher rate than that advertised.

The Consumer Credit Act of 2004 requires lenders advertising loans using typical rates to offer that rate of at least 66% of successful borrowers. This rule is obviously not valid where an advertisement does not include a typical rate.

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