Unfair interest rate!

Squigly

Hi - my son is 22 and is looking for a £6500 loan for a car.

He banks with Santander, has a credit card with them and has had a previous Santander car loan which he paid off early. He also took out a Tesco 0% credit card, last December, to spread the cost of car insurance, which is now paid off.

He has never paid any penalties on any of these although he has occasionally used his agreed overdraft facility.

He phoned Santander for a new loan as they advertised 4.94% on line. After taking all the details the rate came back at 16.9%!

He did a credit check and the only negatives were the average age of credit accounts ia 17 months and the Tesco credit card was taken out within the last 6 months.

It's criminal that he has kept his accounts in order but is penalised on the loan rate! Gone are the days when you could walk into your local friendly bank and discuss it with the manager. Is this really progress??

tomtontom

Your son is a high risk relative to other borrowers. Offering a higher rate is not "criminal", it is good business sense.

meer53

Your sons credit check is irrelevant, Santander will do their own check which is completely different from what your son sees. The rate of 4.94% is only a representative rate, there are lots of other lenders out there but be wary of making too many applications.

jonesMUFCforever

How much do you need to apply for to get the 4.9% rate??

From their website - Rates from 4.2% APR on loans from £7,500 to £20,000 for 1|2|3 World and Santander Select customers.

Does he have a 123 account?
Applying for any amount under £7500 was bound to lead to a higher rate being offered.

TBeckett100

What's the loan to income ratio?
If he has to borrow for the car insurance, can he afford the car?

Squigly

Thanks for your replies.

The loan to income ratio is 1/3

He could have afforded to pay for the insurance outright but chose the 0% card so he could keep saving also.

The rate santander offered was the 123 rate.

We are thinking of taking the loan out in my name and he can pay us back monthly, instead of the bank.

[Deleted User]

Squigly wrote: »

Thanks for your replies.

The loan to income ratio is 1/3

He could have afforded to pay for the insurance outright but chose the 0% card so he could keep saving also.

The rate santander offered was the 123 rate.

We are thinking of taking the loan out in my name and he can pay us back monthly, instead of the bank.

a recipe for disaster if ever there was one :eek:

Poppops

An unfair generalisation

I took a loan out for my son when he passed his test at 17 but had no credit history. He made every single payment on time

dealer_wins

Saving up £6500 for a car means his rate will be 0%.

SeanG79

Squigly wrote: »

Thanks for your replies.

The loan to income ratio is 1/3

He could have afforded to pay for the insurance outright but chose the 0% card so he could keep saving also.

The rate santander offered was the 123 rate.

We are thinking of taking the loan out in my name and he can pay us back monthly, instead of the bank.

Doing this likely doesn't help your sons credit "rating" over the long term with lenders as they will not see him repaying the loan.

Sub £7,500 loans don't attract the best rates. Santander will have the best view of his financial standing, as he banks with them, they will know exactly what he does with his money. He is obviously creditworthy but not deemed to have a strong enough credit covenant to warrant the lowest rates. Far from criminal, in fact prudent business offering rate for risk from the bank.

Your son can try a loan with a bank that offers a "soft search" to see if they will offer a better rate.

Pixie5740

Fixing the LIBOR is criminal, offering a customer with a limited (17 months rather than 6 years) credit history a sub-£7,500 loan with an APR of 16.9% is a calculated risk.

At least 51% of applicants need to get the advertised headline rate and with your son's limited credit history he is not one of Santander's 51%.

Is this progress? Well what would you rather, banks lending money to people willy nilly without any kind of risk assessment?

If your son is not happy with the rate offered by Santander he can take his business elsewhere. It is a free market after all.