Bank refused me loan?!

Fenton271

I recently applied for a loan with HSBC bank for the sum of £7000 over 20months. At the time, they were offering a pretty good interest rate of 6.2%. I checked my credit score beforehand with Experian and was pleased to see that I had a score of 963 placing me well within the 'excellent' credit rating bracket. I have never had any late payments on my report at all and have had a surplus amount of £600 pcm for the last 2 years.

Despite all this and to my complete shock, I was refused the loan. Instead I was offered a rate of 17.9% over a minimum period of 48 months. Taking this into consideration my interest would equate to over £2000 rather than the £375 on a lower rate. The impression that I get is that it is not worth their hassle to offer people loans unless they are seeing a high return of interest from it. Even the bank manager dealing with my request said that the result was ridiculous!!

Consequently I took the loan out with Sainsbury's with a rate of 7.4%. However I was so frustrated at the principle of the matter that I wrote to HSBC bank head office, asking why I had been refused and effectively complaining about their underwriter's decision. My letter was then passed back down to my local branch who could not address the matter and did nothing more than apologise for keeping me waiting in the bank for an hour whilst they spoke to the underwriter on the telephone.

I seem to remember from one of the MSE emails that in order for banks to advertise a particular interest rate, the product has to be available to at least 51% of people who apply for it otherwise they are breaching advertising laws (or something like that). Does anyone know the ins and outs of this? Could anyone shed some light or possibly point me in the right direction to make my complaint heard? Although I have a loan sorted now, it just seems ludicrous that they can get away with advertising a rate that they are clearly not willing to offer. What chance does anyone have applying for a loan at this advertised rate?!!

Many thanks for any replies on the matter.

opinions4u

What chance does anyone have applying for a loan at thisadvertised rate?!!

51% (or more) of those offered a loan will get that loan at the advertised rate.

Ichecked my credit score beforehand with Experian and was pleased to note that Ihad a score of 963 placing me well within the 'excellent' credit ratingbracket.

Why not ask them for a loan then, as they consider your credit score to be so damned good?

You have no right to credit from any provider. The decision to give credit is completely the gift of the lender. If they don't want you, they can decline you. If they don't want you at the advertised rate, they can offer you a loan on different terms. If you don't like those terms you can simply walk away.

Fenton271

opinions4u wrote: »

Why not ask them for a loan then, as they consider your credit score to be so damned good?

You pretty much missed the point of the original post and I do not understand why you are being so nasty.

I applied for the loan and was refused the loan despite having an 'excellent' credit rating.

I then asked for a reason why and my question was ignored in the response.

I believe HSBC might be in breach of advertisement laws and would like to take the matter further.

If you have nothing constructive to say, please do not bother replying. I am looking for some with an understanding of the situation.

MPH80

Why do you believe HSBC are false advertising? Your post hasn't given any evidence that they are, other than the fact you were declined for the headline rate.

An experian credit score means, in most cases, absolutely nothing to the bank and may as well be a random number. They will have their own credit scoring system. You may, or may not, be considered a good candidate for credit under that. Every bank will have a different system that looks at different factors.

I think that is what opinions4u was trying to get at ... albeit in their own particular style.

M.

opinions4u

Fenton271 wrote: »

You pretty much missed the point of the original post and I do not understand why you are being so nasty.

You missed the point of my reply, which wasn't nasty. It was factual with a single glib point about applying to a credit reference agency who magic up a number and then don't offer you credit.

I applied for the loan and was refused the loan despite having an 'excellent' credit rating.

Your credit rating with a company that doesn't offer credit is meaningless. Your credit rating, as assessed by a lender that you are applying to, is rather more important. The two are not the same thing. Just because Experian think you are great and Sainsburys think you are great doesn't mean HSBC have to think you are great.

I then asked for a reason why and my question was ignored in the response.

Probably because the branch didn't really understand the question.

I believe HSBC might be in breach of advertisement laws and would like to take the matter further.

Complain to the ASA. Provide them with your evidence and I'm sure it will be investigated. I'd be fairly confident that HSBC are complying with the appropriate regulations on this.

If you have nothing constructive to say, please do not bother replying. I am looking for some with an understanding of the situation.

I understand that you're peeved at not getting the best rate on offer from HSBC.

A typical distribution of lending will be:

25% accepted on the sexy lead rate.
24% accepted on a higher rate.
51% declined.

Well done on being in the top half of applicants.

jen245

If you have £600 pm spare, why don't just save up for what you want the loan for?

jonesMUFCforever

£600 surplus for 2 years equates to £14400.
Why do you want a loan?

If you had accepted the loan you could have overpaid and reduce the interest paid.
The reason they turned you down (if there was no credit reference issue)must have been affordability issues - do you have £14400 saved?
If not then there is something amiss with your original post.

Fenton271

MPH80 wrote: »

Why do you believe HSBC are false advertising? Your post hasn't given any evidence that they are, other than the fact you were declined for the headline rate.

I understand that according to my credit score (973 out of a maximum 999) I am in about the top 20% of the safest people to lend money to in the UK. I just wanted some clarification to whether they lend to higher risk applicants on the pretense of making more interest from them over a longer period.

Fenton271

opinions4u wrote: »

Probably because the branch didn't really understand the question.

It was directed to Head Office as it was neither the branches fault nor responsibility. Hence why I did not receive a useful answer. I feel sorry for it being offloaded on to the branch really.

opinions4u wrote: »

I understand that you're peeved at not getting the best rate on offer from HSBC.

You could say that. Wasted an entire hour of my day to be offered a rate which was almost 3 times that advertised and to be told that I would have to pay it back over a much longer period.

opinions4u wrote: »

A typical distribution of lending will be:

25% accepted on the sexy lead rate.
24% accepted on a higher rate.
51% declined.

It is my understanding that the bank have to offer the advertised rate of 6.2% to at least 51% of people who apply. Even the Bank Manager said that he thought it was ridiculous as all the information pointed towards me being a perfect candidate.

Thank you for your reply.

opinions4u

Fenton271 wrote: »

It is my understanding that the bank have to offer the advertised rate of 6.2% to at least 51% of people who apply.

No. 51% of those who are accepted.

Otherwise banks would have to accept over half of loan applications which, for a range of reasons, could lead to disasterous consequences for individual banks and the wider economy.

Fenton271

jonesMUFCforever wrote: »

£600 surplus for 2 years equates to £14400.
Why do you want a loan?

If you had accepted the loan you could have overpaid and reduce the interest paid.
The reason they turned you down (if there was no credit reference issue)must have been affordability issues - do you have £14400 saved?
If not then there is something amiss with your original post.

The money saved over the last two years is tied up in investments. The money from the loan is for personal reasons (my younger brother is being bullied at his current school. So I wish to send him to a private school to study without distractions and reach his full potential). I would have absolutely no problem paying the money back over 20 months however sometime you just need the money at a particular time.

Like I said, I now have the loan and everything is fine for me. I am just a little dissappointed that my own bank refused me for a reason which even they cannot appear to pin down. The impression I got is that the whole application process is just to get you in the door just to turn around and offer you an interest rate 3 times higher with no explanation whatsoever. I think that it is a good case for false advertising personally and an unfair way to treat 'safe' people looking for a loan.

Also the total interest payable was only around £400 as opposed to the £2k interest they offered me. Bit daft but clearly a loan to my requirements was not worth the hassle to HSBC.