Halifax Interest Rate - Loan Increase Confusion

matthewmje

Hi, there, wondering if anyone has had any experience of this, and if anyone can help.

I have credit score of 997, and have never missed a repayment on any borrowing before. I work hard, and I pay what I owe.

In July 2014 (correction) I borrowed 10k from Halifax (my Current Account bank for about 30 years) to replace the family car which went pop...

I was loaned 10k as a 'Clarity Loan' by Halifax and given an interest rate of 5.8%.

I've been paying back the loan monthly, and made a number of overpayments, meaning I now only owe £5700 on the loan.

To cut a long story short, our runaround car died this week. I popped into Halifax, and asked if I could top the loan back up to £10,000 (borrowing £4300) to replace the runaround car.

I was told that I could have the additional borrowing, although the interest rate would be increased to 16.6%. This rate is a lot more than the advertised rate of 3.8% advertised within my online bank account.

I've obviously not taken the additional loan out with Halifax, and declined an offer of £30 compensation from the Halifax branch for wasting my time.

The reason for the increased interest rate was given to me as the bank considers anyone requesting an additional loan within 18 months of taking out an original loan is a higher risk, although I could never have predicted at the time of taking the original loan out that the runaround car would also go pop during 18 months.

In the 'Clarity Loan' paperwork for the original loan I see no note that any additional borrowing would be at a higher rate.

So I guess my questions here are...

Are Halifax allowed to do this? They were very keen to compensate for wasted time and send me on my way...

...any thoughts, advice and experiences greatly appreciated...

Gaz83

Yes, they are. They can choose to lend at whatever rate they want. A customer can choose whether or not to accept it.

Gaz83

Also: You only borrowed £10,000 three months ago and already have paid back almost half of it.

Banks and building societies exist to make profits. If you have made massive overpayments their projection is that they will be making very little interest from you. And thus they'll offer any subsequent lending at a higher rate so they can attempt to glean more profit from you. That's how they work.

Finally, your 'credit score' of 997 doesn't matter. Not a bit.

Pixie5740

Yes, Halifax are allowed to do this. You are not borrowing additional money, you would be taking out a brand new loan. Based on a number of factors (including wanting to borrow more money within 18 months) you are seen as a higher risk therefore attract borrowing with a higher interest rate.

At least 51% of successful applicants receive the headline rate but you are not Halifax's ideal/lowest risk applicant hence the 16.6% APR. The fact they have offered you £30 was generous of them in my opinion.

Your credit score of 997 means diddly squat. There's no such thing as a universal credit score and the credit reference agencies don't lend money. (I ought to put that on my signature as I end up saying it at least one a day on the forum.)

matthewmje

Thanks for the replies... I made an error in my first post, I borrowed in July 2014.

[Deleted User]

I'm stunned they offered you any compensation.

clayton16749

Can you not just save up some money and buy a cheap run around for now as opposed to trying to borrow more money?

matthewmje

If only Clayton... :-)

Candyapple

My experience with Halifax and loans in post #5
https://forums.moneysavingexpert.com/discussion/5292916


If you have a good credit history then why not try another loan provider?

Sainsbury's loans headline rate is 3.6%.

RenStar

Could the rate you were offered on the second loan be also because it's relatively small? They offer the lower rate of 3.9% for loans of £7k plus. For loans under £5k, their rate is 18.9%.

However, I echo other posters in that Halifax can offer whatever suits them as it's their money after all.

Is the car repairable at all? A car that dies after 18 months is rather worrying. How old or what condition was it in before you bought it. Personally, this is why I don't do old cars, I can't be bothered with the headache and stress.