Unethical Loan - but can it be challenged?

hemeloid

Hello,

My uncle had a fixed price loan (APR 25.9%) for £3,500 over 5 years at just under £100 per month. Nine months into it (having never missed a payment) he asked for another £1,000 loan. Instead of issuing a second loan, this company consolidated into 1 new loan. He is therefore on a new 5 year deal for £4,350 at APR 32.9% at just under £140 per month.

My simple calculation (which may not be right) shows that consolidating the loan onto the higher rare has cost him about £1,300 (if you include the 9 x £100 payments which have essentially been wasted). Surely it would have been easier to issue a second loan for a £1,000?

My question is simply are these loan companies (and this a supposedly reputable company) under any obligation to do the right thing here? In the 9 month period concerned, both BOE and FHBR have fell significantly and he hasn't missed a payment yet the APR has gone up 7%.

I called the loan company and they don't want to know. Any advice on my next move would be gratefully received.

Wutang_2

hemeloid wrote: »

Any advice on my next move would be gratefully received.

Have a latte with your uncle and work out what unethical means

hemeloid

Wutang,

As a first-time poster I was expecting a slap-down from somewhere, but I was hoping it was going to be a little more constructive. Words like desperate, stupid and naive can be readily applied to him, but not unethical.

If you are implying that this is accepted business practice and he has been very silly, then fine. It would have been helpful to say that and I could have moved on with my tail between my legs..........

Hemeloid

CLAPTON

time would be better spent if you sat down with your uncle and discussed why he takes out these very high interest rate loans

better to discuss ways of increasing his income, reducing his spend and working out a realistic budget... a good format is here
http://www.makesenseofcards.com/soacalc.html


if he wants some practical advice then he may want to post up the SOA results on the debt free wannabe board.. lots of support and help there.

hemeloid

Clapton,

I have posted on one specific part of what is a much bigger problem for him and over the past month, since I was asked to help, I have spent many hours pouring over these forums and discussing with him ways to improve his financial behaviour! He is in the same fix as lots of people - low credit scoring, financial mismanagement, etc and I have found the website and forums extremely helpful.

The bottom line is that he is now selling his house and luckily there should be equity to clear off the debts. My main priority is now trying to instil some financial discipline before the sale goes through as there is a risk the equity will disappear. However, there is only so much that can be done the rest is down to the individual choices.

Thanks for the advice and keep up the good work.

Hemeloid.

iolanthe07

Black Horse keep trying to do this to me. I have a very competitive loan with them at 6.5% APR, but they keep wanting me to top this up with the promise that the monthly payments will not change. Well.......no, maybe not, but a new loan has to be taken out at 9.5%, penalty fees paid, and the loan over a much longer period. I'd be crazy to fall for it. You really have to look at the small print, and it if seems too good to be true, then there is bound to be a catch somewhere.

[Deleted User]

its the way its done im afraid,and makes little good sense if its at a higher apr,which atm is normal.His only option if he has a good credit rating?would be to get a loan elsewhere at a better rate to repay this high rate loan,althougn i suspect his cred rating might not be good?

Debt_Free_Chick

I can see why you view it as unethical. But he should have been sent paperwork for the new loan ....? And presumably he signed it? At that point, it ceases to be unethical as he was simply made an (unethical) offer and accepted it.

If he did sign a new agreement - and to be honest, he must have done - then I can't see anything to be done about it. The time to question it was when the paperwork was received. Sorry

hemeloid

Woodbine / D_F_C,

Chalking it up to experience and moving on.

Thanks,
Hemeloid