Graduate Account Loan

baldricksbollox

Afternoon all.

I was wondering if anyone knew a bit about borrowing and could help me out.

I currently do all my banking with HSBC, and my main account is what they call a "Graduate Account". Basically you get a £2000 overdraft for the duration of PG studies and then about a year after you graduate you start paying interest on it as they reduce it gradually. (In my case it was 2 years later - I don't know why... maybe they missed it or something!)

Anyway, the only real feasible to start paying it back (unless you're earning top dollar) and avoiding the hefty interest is to take a loan out from them to cover it. In all the promotional literature and whatnot they advertise preferential rates for graduates of 8.7% APR for exactly this purpose.

I rang them up today requesting to do this. He went through all his credit checks and so forth and came back saying that it had been approved, but would instead offer me a rate of 12.9% APR. when I enquired as to why I couldn't have the advertised rate, he didn't seem to know and said it could be any number of reasons including my credit rating. Computer says no kind of effort.

Anyway, are they allowed to do this? Surely the point of a credit check is to ensure that I'm trustworty enough to have it in the first place, not to decide what rate I should be on. I don't understand why it would be bad anyway - I have a credit card which gets paid on time every month and has done for the past couple of years, and also loads of DD's, none of which are ever missed.

I thought I'd try and get some clarification from some of you clever types before I started kicking off with them anyway.

Thanks.

Rafter

HSBC (any any loan company) have to offer the advertised rate to 67% of applicants and they are allowed to charge whatever they like to the others.

They use 'risk based pricing' and other jargon to justify this, but effectively they are saying you are a bit riskier than the average applicant and they are going to make you pay extra interest as a result!

It could just be that of the 100 applicants in the month, 67 have already qualified for the lower rate, so they are just going to charge all other applicants that little bit more.

You can try appealing, but to be honest 12.9% isn't a dreadful rate for a loan of this size. What you need to decide is whether you are better off paying the overdraft rate, particularly as when your salary is going in each month presumably you owe less than £2k?

No point in having a 2k loan paying 12.9% and a positive balance in your current account earning 0% compared to say a 20% overdraft with an average balance in the month of -£1,000 - you are better of sticking with what you have and going on a money diet to try and clear it as soon as you can.

Good luck

R.

baldricksbollox

Thanks for that Rafter, it's very helpful.

You're indeed correct and I don't owe more than the £2000 to the bank. I understand what you're saying about taking the interest on the chin, but it's just I'd find it easier to be disciplined to pay it back if it was going out of the account every month on a positive balance.

I'm just a bit narked to be honest. I've been a good customer with them for over 10 years now, and they can't even have the decency to offer me the advertised rate?

I think I'm going to get a few quotes this afternoon and then tell them that another bank has offered me cheaper but only on the condition that I switch my main account to there. That might get me somewhere anyway!

karmachilovething

I'm in a similar situation - been graduated for 2 years, and still the same amount of debt.

Barclays have just informed me I'll be moving to their standard account, so I'm looking a switching and/or taking out a graduate loan to cover the debt.

Almost certainly going to try and switch accounts as there are much better deals out there, and Barlcay customer service has left much to be desired over the years!!! But after Rafter's comments (Thanks!) think I'll leave the loans alone.