Loan Criteria, why is it so secret.

NY1449

I wondered if someone could shed some light on why companies are so secretive about the criteria that you need to fufil in order to be approved by them for a loan. Surely if they made these figures/facts public it would improve customer service and peoples credit ratings?

Am I being too simplistic? If I want a loan why should I not know if I will be accepted or fall within the criteria for acceptance. It seems that loan companies are simply secretive so that you apply in the "hope" of acceptance.

lawrie28

because it means they can decline you for any reason!!

Alos it means that they can select the best applicants. If you have a limited amount of money to lend out, and you are doing it at the same rate, regardless of the customer, well if you can lend it to someone with a better than average credit rating, or a low credit rating which would you choose?

You will take the better rating because you are statistically more likely to get your money back!

But if you only get one applicant, they you take your chance, cos otherwise you don;t make any money.

_Andy_

If they made them public they'd be inundated with fraudulent applications (more so than already) because everyone would know exactly what to put.

NY1449

I guess I can see the point of the best applicants but with regards to fraudulent applications surely you have to prove what you say is true. i.e. your income, credit file etc. I just think it would be good if a company said exactly who they will accept rather than saying people with CCJ's welcome when they are not! Lifes not fair!!

_Andy_

Income usually doesn't have to be proven with unsecured lending.
So let's say you were on £20k and you wanted a £15k loan.
You read that the lender requires an income of £25k+ for that level of lending. So you put down £26k as your income, etc.
Same with length of time in employment, job title, etc.

NY1449

I see your point...I guess I am too honest!

iolanthe07

Banks rely a lot on having a 'headline' APR which they advertise, but quite a few applicants will be turned down for this and offered the loan at a higher (sometimes much higher) APR. A proportion will reluctantly accept this, thus making the bank more money. If applicants knew they would be turned down for the lower APR, they wouldn't bother applying.

[Deleted User]

iolanthe07 wrote: »

Banks rely a lot on having a 'headline' APR which they advertise, but quite a few applicants will be turned down for this and offered the loan at a higher (sometimes much higher) APR. A proportion will reluctantly accept this, thus making the bank more money. If applicants knew they would be turned down for the lower APR, they wouldn't bother applying.

But this information is freely available already - and anyone can see this.

Banks are obliged - like most companies - to ensure that X% of people receive the advertised deal. I can't remember which regulation specifies this, but if they advertise something as 'typical' then they need a certain percentage of applicants to receive this.

So, if you know what percentage actually get the 'typical' APR you can work out your chances...or at least know what to expect...