A&L-Changing APR

david5151

Yesterday I applied on-line through Moneysupermarket for a £5000 A&L loan over 2 years.
Today they rang me up and asked lots of non relevent questions and a few relevent ones and really tried to sell me payment protection.
They offered me the loan at 8.95% APR. I said I would not take the loan at this rate as it had been advertised at 5.9% APR.
The chap then said he would speak to his manager and then came back with a rate of 6.9% APR.
Is this standard practice or is it a bit like the old travel agents trick of advertising low priced holidays that didn't exist?
It all seems a bit dubious to me.

David

Reaper

It is a dubious practice. If my memory serves me right (which it may not) to avoid falling foul of advertising standards they must give at least 50% of applicants the advertised rate. The rest they can charge what they want.

shonky_2

It is called Risk Based Pricing and almost every lender uses it. There was no advertising guidelines brought in November 1 which means lenders have to offer these loans to 66% of their customers. The biggest issue is that this % is self-regulating, I read an article the other day which quoted Moneyfacts as saying that the Office of Fair Trading have no intention of regulating this %.

iceburn

shonky wrote:

It is called Risk Based Pricing and almost every lender uses it. There was no advertising guidelines brought in November 1 which means lenders have to offer these loans to 66% of their customers. The biggest issue is that this % is self-regulating, I read an article the other day which quoted Moneyfacts as saying that the Office of Fair Trading have no intention of regulating this %.

Two lender that does not use risk base pricing I know of is Egg and Post Office. Egg I find is easier to get a loan but POL it seem to be a bit mroe picky. And POL has recently reduce the interest rate to a more competive rate (and EGG are having a 1% discount sale at the moment.

farrell285

I applied for an A & L loan, attracted by the 'typical' rate. Thought there would be no problem with a long and good credit history. When the documents came through they had offered me a rate of 8.9%. I phoned for an explanation and after some toing and froing they said they would reduce to 6.9%. Not 5.9% but too much hassle to try elsewhere. This was Monday and papers not arrived by today so I phoned up to find out what was happening. They said the papers had gone out yeaterday and that the good news was that they had reduced the rate to 5.9%. Don't know why they changed it again but if you don't ask...