Sainsbury 3.4% loan

karin_cc

After Martin's email offering the Sainsbury loan of 3.4% up to £25k I thought I'd use it to do some home improvements and possibly even pay off some of my mortgage which is at a higher rate. I've never ever been late with any bills (all direct debit), pay off my 3 credit cards each month, have paid off the largest part of my flat and have savings too. Am a medium earner and don't have any other loans or have had any other loans than my mortgage. Got a response the next day that "they may have offered me the loan at a different rate" but it would be in the post. Much to my surprise, they agreed the loan, but at 7.6% !! I am wondering if it is just false advertising by Sainsbury to get attention, and applications in the hope that desperate people go for the deal because they get approved, even if the rate offered is then more than twice the rate advertised.
Has anyone else had any experience with Sainsbury on this? Not trying to pat myself on the back, but I am low risk, with a great history so would they decline others with a worse history, or ?? just would like to know if ANYONE has actually been accepted on that 3.4% rate. Thanks.

Pixie5740

It's not false advertising. When a typical APR is advertised at least 51% of successful applicants will receive the headline rate. For whatever reason you are not Sainsury Bank's ideal customer. That could be down to any number of reasons not just your credit history.

There was a whole thread dedicated to this topic not that long ago.

Sainsburys - has anyone got the advertised rate?

Clive_Woody

Pixie5740 wrote: »

It's not false advertising. When a typical APR is advertised at least 51% of successful applicants will receive the headline rate. For whatever reason you are not Sainsury Bank's ideal customer. That could be down to any number of reasons not just your credit history.

There was a whole thread dedicated to this topic not that long ago.

Sainsburys - has anyone got the advertised rate?

We really need a sticky on here to explain what 'typical APR' means as we get at least one of these threads a week claiming mis-selling, false advertising, it's a con, Martin Lewis lied, etc....

DCFC79

Clive_Woody wrote: »

We really need a sticky on here to explain what 'typical APR' means as we get at least one of these threads a week claiming mis-selling, false advertising, it's a con, Martin Lewis lied, etc....

I completely agree.

How is Martin Lewis allowed to lie.

BMN

Pedantic but...

The term "typical APR" isn't used anymore and had a different definition to "representative APR" which is used now.

In any case the definition stated in this thread isn't wholly correct. Representative APR "is an APR at or below which the advertiser reasonably expects, at the date on which the credit advertisement is published, that credit would be provided under at least 51% of the consumer credit agreements which will be entered into as a result of the advertisement". Which doesn't necessarily mean that at least 51% of successful applicants will receive the headline rate.

Clive_Woody

DCFC79 wrote: »

I completely agree.

How is Martin Lewis allowed to lie.

He probably gets a cut of the profits from Sainsburys...:money:

Hazzanet

I understand pricing to risk etc, but I've always found the "representative APR" thing a little dishonest. It's not like we go into Sainsbury's and pick up a tub of butter priced at £1.00 "representative" and then get to the till and find the item's £2.20 because the checkout operator doesn't like the cut of your jib, but that's okay because we sell the tub of butter at £1.00 to a minimum of 51% of our customers. I know this is a simplistic way of looking at this.

I think the biggest irritation, bah one or two lenders, is you have the full credit check registered against you even if you don't proceed. I know that Martin is pushing for the soft-credit search which is commendable, but until all lenders adopt this approach it is like not knowing the price of the item until it's rung up at the till.

(They offered me 7.8% so I told them to stick it as I have a credit card with a lower APR that I could use)

Edit: Just realised that Sainsbury's have a soft-search tool from another thread. Wasn't immediately obvious on their site.

Pixie5740

Taking out a loan is nothing like buying a tub of butter. It's not comparing apples with apples at all.

How can lenders truly assess the rush of lending someone money without carrying out a full credit search before releasing the funds?

Hazzanet

Pixie5740 wrote: »

Taking out a loan is nothing like buying a tub of butter. It's not comparing apples with apples at all.

Which is why I acknowledged it was a simplistic view.

Pixie5740 wrote: »

How can lenders truly assess the rush of lending someone money without carrying out a full credit search before releasing the funds?

I also understand that, the point is that the price of the credit is unclear at the point of beginning the commitment to purchase. Again, if you were to take the analogy of the tub of butter as it is intended (a vehicle to represent price) if I knew the butter was to cost me £2.20 at the till, I wouldn't have bothered picking it up and taking it to the till, whereas at £1.00 I would.

I also find it slightly ironic that a loan costs more if they feel that you're less 'able' to pay (although I understand the concept that more risk = greater potential reward, it seems a little out of place in a loan scenario as you impair the borrower's ability to pay more).

I'd have rather been outright rejected for a loan instead of being offered a rate more than 2x the representative figure.

Also, isn't the soft-search supposed to be a "full credit search" without the footprint?

Clive_Woody

My understanding (which may well be wrong) of the reason behind the full search being recorded is that a person could potentially apply for multiple loans at the same time. If lenders were unaware that other applications were also in progress they would not be able to fully assess risk as the borrower could suddenly end up with a lot more debt that when they started and their ability to repay seriously compromised.

I like the idea of a provisional soft search to give an indication of what APR might be offered, but I would assume that this method is not infallible and may not always be accurate so would also come in for criticism.

Pixie5740

Your butter analogy isn't just simplistic it really doesn't apply to loans at all.

A soft search isn't the same as a...what's the opposite? A hard search? Just look at the number of people who receive mortgage DIP from Halifax based on a soft search who then go on to be offered a lot less or no mortgage at all when they submit a full application. A soft search might give you an indication of whether or not you'll be accepted, some might even give you an indication of the rate but until the lenders carry out the hard search they can't definitively tell you which rate you'll get.