Not getting representative APR

benjus

I'd like to take out a loan to buy a car. I have a good income, and my credit history is excellent - I have several credit cards and a mortgage, and have had loans in the past. No missed payments or anything negative at all.

The MSE eligibility checker indicates that I have a 90% chance of getting some of the loans with representative APRs of around 3.4%.

However, when I've tried getting some personalised quotes, I'm getting offered rates like 9.9% (First Direct) or even 16.9% (Halifax). I decided to try my luck with Sainsbury's and have now gone through all the application process just to be told it's approved in principle but I didn't get the representative APR (but declined to say what I have been offered).

The main things I can think of on my credit report are:

• We have just completed a re-mortgage
• I have spent about £3.5k on a credit card recently. I intend to pay this off from savings, but haven't got around to it yet. The direct debit (which I think has just been paid) pays the minimum repayment.

Are the bad rates likely to be down to one or both of these?

Also, I decided to keep things simple by putting it in as a sole application - I now wonder if it would have been better to apply jointly with my wife (who also has good credit history).

Any suggestions as to the best way to proceed now? Anyone know if Sainsbury's will have already done a hard credit search or will that only happen if I sign and return the form they have sent me?

AnotherJoe

The main things I can think of on my credit report are:

• We have just completed a re-mortgage
• I have spent about £3.5k on a credit card recently. I intend to pay this off from savings, but haven't got around to it yet. The direct debit (which I think has just been paid) pays the minimum repayment.

Are the bad rates likely to be down to one or both of these?
=====

I'd say "yes". Even without the new mortgage (which might be releasing equity so might indicate financial issues by itself??) you have now got another loan on credit card which you are effectively not paying back.

CLAPTON

your income and the amount you want to borrow, might just be factors

benjus

Thanks for the advice. The main reason I hadn't paid off the card yet was because I had to cancel it a week or so ago, so it had dropped off the online banking systems.

As for the remortgage, I guess that they can see from the credit files that the amount of the remortgage was about the same as the balance of the existing mortgage.

Anyway, I just called Sainsbury's. The rate they are offering is 3.9% instead of 3.4%, which is good enough... so going ahead with it.

glennstar

Benjus,
A few items occur to me that might be relevant;

• A rep APR is advertised by the Lender based on 50% +1 loans being written at that rate. This means there are 50% -1 loans that did not make that rate... assuming the Lender is actually being honest.
• I would be vary wary of a piece of software/website making claims about the likelihood of getting a loan or getting a loan at a given rate on behalf of a Lender. The MSE calculator (which I have not used but am sure is very good) like many examples of its kind including some complex beasts like MoneySuperMarket's HD Decisions Engine, will be looking at a number of key criteria such as employment status and duration, home owner status and duration, current income, marital status, dependants, outstanding debt and general affordability criteria, loan amount and duration. This information helps the tool make a general stab at eligibility, but it cannot possibly take into account commercially sensitive factors such as, but not remotely limited to;
  1. the score card agreed between the Lender and their CRA - which varies from Channel to Channel and Lender to Lender based on their risk appetite.
  2. the particular score card in use for the Channel through which you arrived. Some Lenders will infer quality if you arrive via SEO or an approved Broker that is absent if you arrive via PPC, for example. They may offer a less competitive rate based on the profile of others arriving through that same Channel.
  3. the internal considerations of the Lender at that exact time - are they ahead or behind budget for that particular product on that particular day? If they are behind they may well offer you a better rate to convert you.
  4. what commission are they paying on the Channel through which you arrived? This obviously adds to the cost of acquisition which is ultimately borne by you.
  5. when your particular mainstream bank, building society and/or credit card company reports back to the prospective Lender's CRA. This is not done in real time (often monthly) so there is always that chance that applying at one point in the month may yield a different score than applying at another.
  6. What other people are doing. Like any other financial service, money lending is a numbers game and the behaviour of others affects you. Is there more competition for finance this month than last? Have there been more defaults this month than last, etc.

I appreciate I have only scratched the tip of this particular iceberg but I hope it provides a little insight as to why there is no way on earth a third party calculator can possibly do anything other than give you a very rough indication.

Mike_Dorey

I had this experience with Sainsbury Bank last week, I have very good credit history and applied for a loan @ 2.9 APR and guess what... I was successful but was offered an APR of 8.2%. So do these financial institutions actually ever give out the APR they are advertising or are they simply trying to lure you into taking out a more expensive loan?

MallyGirl

as stated above, they must give it to 50% of successful applicants plus 1

iolanthe07

There are all sorts of reasons why a lender may not offer the headline rate to someone with good credit, including the obvious one that they have filled their quota of cheaper loans for the current month/quarter/year. They are hardly going to exceed 50%+1 are they? Some people seem to take a refusal of the headline rate personally, but it is really just business.

PeacefulWaters

Mike_Dorey wrote: »

I had this experience with Sainsbury Bank last week, I have very good credit history and applied for a loan @ 2.9 APR and guess what... I was successful but was offered an APR of 8.2%. So do these financial institutions actually ever give out the APR they are advertising or are they simply trying to lure you into taking out a more expensive loan?

Welcome. You'd have got your answer reading the thread.

They probably decline around 50% of all applications, so you should be pleased you've been offered something.

JJG

iolanthe07 wrote: »

There are all sorts of reasons why a lender may not offer the headline rate to someone with good credit, including the obvious one that they have filled their quota of cheaper loans for the current month/quarter/year. They are hardly going to exceed 50%+1 are they? Some people seem to take a refusal of the headline rate personally, but it is really just business.

That makes no sense. You can't achieve 50%+1 loans at the advertised rate and then continue just giving loans at a higher rate. As this by definition would push the loans given at the advertised rate below 50%.

Edit: And the rules are actually 51% of business expected, not 50% +1.

iolanthe07

JJG wrote: »

That makes no sense. You can't achieve 50%+1 loans at the advertised rate and then continue just giving loans at a higher rate. As this by definition would push the loans given at the advertised rate below 50%.

Edit: And the rules are actually 51% of business expected, not 50% +1.

Good point (and I knew it was 51% not 50%+ 1 but I didn't want to muddy the waters from a previous poster). However, their quotas are adjusted according to the applications received, and my point really was that a refusal should not be taken personally.

business expected. This doesn't make sense. Do you mean 'business accepted'?