Personal loan interest rate

cooltt

Hi All
Just a quick question.

Never missed a payment in my life with anything, plenty of closed credit accounts, been with the same bank for nearly 20 years, never used my overdraft. Currently have £20K of unsecured debt which i know is all down to me and will pay back every penny.

My bank has offered me a loan at 12.9% when their website said 6.7%. I expected it to be a little higher with my circumstances but was really annoyed at 12.9%!

I understand how they work out risk etc but really it's about getting as much back from you as possible. The way they caculate risk is deeply flawed and just a smoke screen in my opinion.

Anyway rant over, is there any way i can jiggle with the remaining 10K when i get there to minimise the total interest i'll pay back? Or any ideas to minimise the interest etc?

I can make as many overpayments as i want apparently.

Even if i end up saving 1K in interest then i'd be happy.

somethingcorporate

Unless you are involved in the complexities of calculating credit risk I don't think you're in any position to say it is deeply flawed and a smoke screen. The calculations would likely be well beyond the grasp of the average man in the street.

You just sound bitter they gave you a rate which is not their headline rate.

If you're not happy have you tried elsewhere? Remember your bank will know you best so arguably (or not) are going to give you the most competitive rate although you could try elsewhere, P2P lending, 0% credit cards.

Clive_Woody

My FIL was a Fellow of the Institute of Risk Management, he as all sorts of qualifications on assessing and managing risk (although more from an insurance, re-assurance stance). From what I gather it's a fairly complex area and not really one that I could stay awake long enough to understand.

At the end of the day unless you are a very big earner having £20k of unsecured debt and trying to borrow more money would worry a lot of lenders. To be honest that fact that you got an offer at all is quite encouraging.

The usual advice is to focus on repaying your debt with the highest interest first or if possible shifting this to a 0% interest credit card which gives you a bit of breathing room.

Try posting an SOA on the debt free board as there are folk on there who are real expersts.

CLAPTON

cooltt wrote: »

Hi All
Just a quick question.

Never missed a payment in my life with anything, plenty of closed credit accounts, been with the same bank for nearly 20 years, never used my overdraft. Currently have £20K of unsecured debt which i know is all down to me and will pay back every penny.

My bank has offered me a loan at 12.9% when their website said 6.7%. I expected it to be a little higher with my circumstances but was really annoyed at 12.9%!

I understand how they work out risk etc but really it's about getting as much back from you as possible. The way they caculate risk is deeply flawed and just a smoke screen in my opinion.

Anyway rant over, is there any way i can jiggle with the remaining 10K when i get there to minimise the total interest i'll pay back? Or any ideas to minimise the interest etc?

I can make as many overpayments as i want apparently.

Even if i end up saving 1K in interest then i'd be happy.

how much did you ask your bank to lend
what do you earn
what are you existing debt detail : amounts, APR, monthly repayment


apart from your high level of debt is your credit record clear of late payments etc ?

cooltt

somethingcorporate wrote: »

Unless you are involved in the complexities of calculating credit risk I don't think you're in any position to say it is deeply flawed and a smoke screen. The calculations would likely be well beyond the grasp of the average man in the street.

You just sound bitter they gave you a rate which is not their headline rate.

If you're not happy have you tried elsewhere? Remember your bank will know you best so arguably (or not) are going to give you the most competitive rate although you could try elsewhere, P2P lending, 0% credit cards.

Theres nothing complicated about calculating risk, the significant risk factors remain the same no matter who you are with just minor variations depending on the lender.

Thanks to all for the other advice, i'll go with plan A toward the end of the loan period.

DCFC79

The way they caculate risk is perfectly fine, whats so wrong with it then OP ?

andydiysaver

cooltt wrote: »

Hi All
Just a quick question.

Never missed a payment in my life with anything, plenty of closed credit accounts, been with the same bank for nearly 20 years, never used my overdraft. Currently have £20K of unsecured debt which i know is all down to me and will pay back every penny.

My bank has offered me a loan at 12.9% when their website said 6.7%. I expected it to be a little higher with my circumstances but was really annoyed at 12.9%!

I understand how they work out risk etc but really it's about getting as much back from you as possible. The way they caculate risk is deeply flawed and just a smoke screen in my opinion.

Anyway rant over, is there any way i can jiggle with the remaining 10K when i get there to minimise the total interest i'll pay back? Or any ideas to minimise the interest etc?

I can make as many overpayments as i want apparently.

Even if i end up saving 1K in interest then i'd be happy.

nearly exactly the same thing happened to me.


I wanted a car loan and am (not for very much longer) with HSBC. HSBC in the past have given me great APR rates - like you I never missed any payment on anything and I run my bank account like a professional account ( my job helps in me doing this!)


only difference is I read headline rate of 4.8, expect at worse to be dragged out to 6, only for it to be 12, which in compound interest terms, is like signing away your future


so I had a hunch, and a bit of a bet with myself, I called them back thinking I'd reject the larger loan but try it on for a smaller loan with smaller repayment period.... if I was wrong, an obviously low risk counter offer, would mean equal or lower rates, if I was right, and it is about nothing but pure hard PROFIT (not loyalty, not impeccable credit history with them) they'd offer me a much higher interest rate because they want MONEY


guess what they said " different borrowing band 21%" !!!!!! what part of borrowing muliples less in cash and paying it back in a quicker timeframe is appropriate for them to double an already exorbitant interest rate?


I rejected both loans


My findings from this little experiment, if they think you can pay it they will charge it. So rating or not, if they think you're good to mortgage away your entire future and meet every montly payment, then so to say , the house is all-in


responsible lending ?


you should take it as a compliment - your bank obviously thinks you are as reliable a mug as my bank thinks I am


Leaving HSBC now, regardless of any possible impact on score, for me has now become a moral issue.


I cannot advised you on early repayments though you should get some respite, what I can say is 12% is absolutely ridiculous and as one who was offered the same I took the smart decision and walked away.

andydiysaver

DCFC79 wrote: »

The way they caculate risk is perfectly fine, whats so wrong with it then OP ?

I work in intercompany risk management, I know a bit of how risk calculation is meant to work


what's wrong with the way these banks treat the consumer is the risk model is not based on risk, it is based in part on risk and in part on profit


take my example I've just posted, or there are countless others. if they think you can pay it, they will charge it.


this is the commodity of debt we are talking about and making a profitable sale. Therefore the good rates are probably for the very average customer. Because the house isn't sure so it takes a gamble. Where the house is sure of decision - in terms of high risk, it turns to credit score and rejects outright or if yes, insures its risk with a high APR. Where the house is sure in terms of income and customer's ability to pay, it should offer lower rates but it doesn't always. If it sees a sitting duck or cash cow or smells any kind of desperation, then the profit arm of the same so called under-writing dept takes the floor. In my example my bank has access to statements, so it can see I never miss any bill am always in credit and have plenty of disposable cash.


At best credit scoring/risk management is a very entropic kind of voodoo without scientific basis ,but at worse, it's a thin smokescreen and behind that , it's just about who will cough up the most at the most ridiculous rate. distance themselves as they may from Wonga and co, the banks are driven every bit as much by the green stuff. afterall, headline rates are one thing, but who actually gets them? If I put a sale on ebay saying you've bought 5 lightbulbs but you might get 4 you might get 9 and usually sent out two, I'd be out of business very fast and rightly so.


These are just observations. I'm not bitter, I didn't need the loan or the new car. one thing I will say though is when I'm back in 6 months for my next try, it won't be with my bank, and my bank won't be HSBC

Brock_and_Roll

cooltt wrote: »

Hi All
Currently have £20K of unsecured debt .

There's your answer!!!

£20k is a lot of unsecured debt unless you are on £100k a year!

Clive_Woody

andydiysaver wrote: »

what's wrong with the way these banks treat the consumer is the risk model is not based on risk, it is based in part on risk and in part on profit

Out of curiosity how do you think banks will function without making a profit?


I would imagine profit levels are fairly uniform across the various risk bands due to the higher number of defaults among the higher risk borrowers cancelling out the higher returns from the higher risk borrowers who do repay as agreed at a higher APR.

andydiysaver

bet it wasn't 20k, bet it was 10k -15k and compound interest did the rest! otherwise OP is understating at least a 30k debt !


and it's horses for courses, tried tested and ready made trough to slurp out of (high rate) or OP is half way through term has never missed a payment and has wage of £X in disposable after all outgoings, in which case under writers should but don't always offer lower APR