typical apr% northern rock

fifi2212 · 25 October 2006 at 3:44PM

Hello All,

I am a little confused - I have read all the information on Banking and Loans on this website and it was rally helpful. After all my investigating it appeared as though Northern Rock would be my best bet.

2 Nights ago I applied for a Northern Rock unsecured loan of £1500 with Typical APR of 5.7%.
I have an excellent credit score with Experian with no missed or late payments on my file at all! I am 22 with a mortgage of approx 82% so I thought I would be in an excellent position to get the 5.7%

I called NR and applied over the phone and they said I was accepted - they then kept pushing me to get their loan care cover. I explained at least 3 times that I did not need this as my partner earns very well and we have great joint savings.
This seemed to be a problem for them and they even said that they would have to check if it would change their decision! :mad:
They came back and said that I can only get APR of 7.8%.

Can anyone explain this to me as when I asked why they said they could not prvide that information? It seemed to me that I got that % just because I said no to loan cover.

I am sorry for going on but I really am confused - I wonder how many people actually get the rate of 5.7%.
Is there really no way they can tell me why I was not offered this?

Richey_2 · 25 October 2006 at 4:00PM

I'm afraid I have no advice as I'm a newbie with a poor credit history, but I thought I might ask one question....

Why do you need a fairly small loan if, as you say, you have "great joint savings"? I know its nice to have a rainy day fund, but as Martin says, your savings are probably only making you 2-4% and a loan will cost at least 5.7% (or 7.8%)...

So, maybe use your savings for whatever you need to buy, then put the amount you would pay on the loan back into your savings each month?

Sorry it doesn't answer your question, I'm just trying to help you stay debt free, because debt hurts!

Astaroth · 25 October 2006 at 4:50PM

The most likely reason the APR is high is because of the fact that you are only borrowing £1.5k. As a rule of thumb the lost APRs are for those applying for a middling about of money.... low and it needs to be increased as the admin costs are the same irrespective of if you are borrowing £10 or £100,000 and high get high APR because of the increased risk of losses/ extent of losses

Credit scores are set by each lender so there is no way to truely say if your score is high or low with a particular lender - Experian can only tell you what your credit history and what they think you represent as a borrower but seeing as experian dont do lending their score isnt worth the paper its writen on. For many lenders your age would be a negative point and presumably you havent been in your current job that long which would also go against you with most scoring.

A typical APR means that at least 65% of people must be able to get it based on rules laid down by the government of how this is measured.

I have to echo Richey's comments though, why are you borrowing when you have savings?

Honestly I would say it is the low loan amount that is the main reason.

Rafter · 25 October 2006 at 5:34PM

Astaroth is right,

They have to offer the typical APR to 67% of applicants, but if you look on the ads or website it will make it clear that this is for loans over £5000 usually.

Making a loan conditional on taking out the insurance is against the law too! The insurance is for your benefit - not the banks. Problem is it is hugely profitable for the banks. It is not possible to make any money on a 5.7% loan, so they charge about 10% for the insurance and hope at least 50% of people take it up!

If you really need the money, 7.8% is good value for that sum, but as others have said you should think about using savings. you might be able to get yourself a life of balance at 3.9% or 0% credit card which would be even cheaper for you.

Good luck.

R.

fifi2212 · 25 October 2006 at 6:04PM

Thanks guys - I did go through the option of using the joint savings but unfortunately I am the most stubbornly independent person in the world! lol

The money is for my own use and not for the both of us and therefore I do feel it is up to me to deal with it - although I am not so stubborn that I would jeopardise myself financially.

I have only been at my current job for 1 year so I guess it could be that, however my previous job I was in since I was 17.
They do say on their website thought that the rate of 5.7% is for any loan amount.

I hope you guys don't think I am being stupid....

Astaroth · 26 October 2006 at 10:40AM

Not at all.... to be honest, whilst the government set rules on what Typical APR and APR etc all have to mean to make it easier for customers I dont think the actual definition of these terms are either that logical nor explained to consumers by the government at all well.

Whilst I have little to do with the banking side of my employers you do still tend to pick up on these things over time

Sam_Bee · 28 October 2006 at 1:13PM

Northern Rock explicitly stated that their interest does not change depending on the amount they lend. They also were rude and offensive when they proceeded to offer me 10.9% - when I have excellent credit.

Which I naturally turned down, the cheeky little so and so's!

sarahmoo · 31 October 2006 at 7:44PM

same for me....sam...what do I do now? Where else shall I try? What did you do?

typical apr% northern rock

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