Urgent - please advise ASAP.... wrong APR offer

Rochdale_Guy

Sorry, rushing to type this in my 10 minute break.

I applied for an online advertised "Northern Rock" 6.4% APR loan of £7,000 over 7 years.

Finally got an acceptance letter when I came home this dinner, offering me a 7.4% APR rate

I know it's only a few extra pounds to pay out each month but nowhere did it say on the online application process it would be a 7.4% rate, a whole 1% more than thay advertise it at being. There are other cheaper lenders than this supposed 6.4% loan - but I chose Northern Rock as they have no penalty if you pay the loan off earlier.


It can't be because of a bad personal credit rating as I have an MBNA credit card with an £11,000 limit - which I assumed meant I was "A OK".

I don't miss payments etc and always pay each and every month on time.

Do I sign the paperwork when I get home tonight and post it tomorrow or phone them up and query why I got this 7.4% offer? (I can't turn it down though as I need the money for a car now I have passed my test).

Anybody please help ASAP?

Thankyou,
RG.

ArchieB_2

You obviously didn't meet the criteria for their 'typical' APR figure. Most lenders will offer a higher APR if you don't meet the criteria for their best rate.

I would question it -you have nothing to lose.

You could try another lender, but you don't want too many credit checks in a short space of time.

mickr53

Same thing happened to me yesterday.. I rang and asked the question. They couldn,t give me an answer.. Its to do with there own point scoring system... I still said I wanted to know what part of the point scoring system made me 8.9% instead of 6.4%... As I had had a mortgage with them for 10 years. And previous loans... Never missed a payment. Own my own home with only 50% mortgage outstanding and earn approx 50k a year... He still couldn,t or wouldn,t answer me...

:mad: :mad: :mad: :mad: :mad:

Skint_Catt

I got 7.9 yesterday with Northern Rock :mad:

Ah well, it'll do me for now.

---lee---

Rochdale_Guy wrote: »

It can't be because of a bad crefit rating as I have an MBNA credit cvard with an £11,000 limit which I assumed meant I was "A OK".

If you don't need the 11K limit, you could always ask NR if they would offer a lower APR if you reduced your limit? Maybe they think you have too much available credit.

Rafter

NR and others have to offer their typical rate to 67% of applicants.

They will manage this ratio quite closely and generally offer the advertised rate to the minimum number of people possible.

The best way to guarantee getting the best rate is to initially accept the rip off overpriced payment protection insurance. Then once you have secured the 6.4% rate, cancel the insurance and by law they cannot change your interest rate because the insurance is for your protection and not theirs.

Insurance increases the profit on the loan about 5 times and increases the APR (including insurance) to over 12%.

Loan companies therefore advertise a really low rate (ie 6.4% which is cheaper that many mortgages) and then cherry pick customers who want insurance where they will make a good profit and offer those who decline insurance a higher rate so they still make some money.

Northern Rock are currently offering 6% on their fixed ISA to get money in, and are then lending it out at 6.4%.

Their expenses are pretty low but even so that only leaves about £1 profit on a £5000 loan per year. This is also before taking off the losses from the 3% of customers who never pay their loans back and go for an IVA or bankruptcy.

So they have to sell insurance or try and make a bit more in order to make money.

Really we should all be paying about 8% for unsecured loans and a fair price for the insurance, but the current market doesn't work like that.

R.

Rochdale_Guy

mickr53 wrote: »

Same thing happened to me yesterday.. I rang and asked the question. They couldn,t give me an answer.. Its to do with there own point scoring system... I still said I wanted to know what part of the point scoring system made me 8.9% instead of 6.4%... As I had had a mortgage with them for 10 years. And previous loans... Never missed a payment. Own my own home with only 50% mortgage outstanding and earn approx 50k a year... He still couldn,t or wouldn,t answer me...

:mad: :mad: :mad: :mad: :mad:

Can't believe they gave you 8.9% APR - sheesh

Rochdale_Guy

Rafter wrote: »

NR and others have to offer their typical rate to 67% of applicants.

They will manage this ratio quite closely and generally offer the advertised rate to the minimum number of people possible.

The best way to guarantee getting the best rate is to initially accept the rip off overpriced payment protection insurance. Then once you have secured the 6.4% rate, cancel the insurance and by law they cannot change your interest rate because the insurance is for your protection and not theirs.

Insurance increases the profit on the loan about 5 times and increases the APR (including insurance) to over 12%.

Loan companies therefore advertise a really low rate (ie 6.4% which is cheaper that many mortgages) and then cherry pick customers who want insurance where they will make a good profit and offer those who decline insurance a higher rate so they still make some money.

Northern Rock are currently offering 6% on their fixed ISA to get money in, and are then lending it out at 6.4%.

Their expenses are pretty low but even so that only leaves about £1 profit on a £5000 loan per year. This is also before taking off the losses from the 3% of customers who never pay their loans back and go for an IVA or bankruptcy.

So they have to sell insurance or try and make a bit more in order to make money.

Really we should all be paying about 8% for unsecured loans and a fair price for the insurance, but the current market doesn't work like that.

R.

Thanks for explaining how things work from their point of view.... doesn't make me feel any better though