Shawbrook loan extortionate APR

tpook82

Received an annual statement from shawbrook today and bit shocked what I read so I've dug out original paperwork to confirm

Basically in 2015 we had a conservatory built by amber windows. Paid half cash and half using a loan from shawbrook setup by amber. As usual the sales guy did his patter with a today only deal.

It appears he managed to brainwash with me figures and I have duly signed for a loan of £7.5k over 10 years. He flogged it good with the old if you can pay lump sum will reduce term payments etc

Anyway appears loan is setup on 18.9% Apr and I'm now 2 years in with 8 years to go. Overall I will be paying back over twice what I've borrowed

My credit rating always been good so why have I been conned into this.

Where do I stand? Can I complain to ombudsman about this or is it better to try and secure new loan either with shawbrook or elsewhere?

jonesMUFCforever

You were not conned but you were ... a word beginning with s_____.

If you have the papers now you had them when you signed up.

There is nothing stopping you getting a settlement figure and applying for finance elsewhere to pay it off.

bowlhead99

tpook82 wrote: »

Paid half cash and half using a loan from shawbrook setup by amber. As usual the sales guy did his patter with a today only deal.

It appears he managed to brainwash with me figures and I have duly signed for a loan of £7.5k over 10 years. He flogged it good with the old if you can pay lump sum will reduce term payments etc

Well, he was correct that paying more at the beginning (e.g. half cash instead of no cash) would reduce either the term of the loan or the size of the payments that you would have had to pay if you borrowed £15k instead. So, "the old, if you can pay lump sum will reduce term payments etc" is true.

And then when you owe the £7.5k plus interest over 10 years, you will reduce the term or the payment size if you make further lump sums. But it seems you haven't done that, correct? You are just paying the normal monthly amount as originally agreed, so your debt is still quite large.

So, yes he is a good salesman if he convinces you that the loan is useful if you want the windows sooner rather than later, and not too expensive if you pay it off quick or make large lump sum payments, and it is certainly cheaper than a credit card where the APR might have been higher than 20% and take over ten years to pay off if you only paid the minimums, and you agree with all of that, but you don't bother to shop around to see how much an unsecured personal loan would have been to get privately.

Anyway appears loan is setup on 18.9% Apr and I'm now 2 years in with 8 years to go. Overall I will be paying back over twice what I've borrowed

That sounds about right. An 18.9% APR loan paid in equal monthly chunks over 10 years usually results in paying back about 2.1 times the amount borrowed.

My credit rating always been good so why have I been conned into this.

Their goal in selling credit is to charge a high enough rate to make good profits even after some people fail to pay them back.

Your goal, if you have a decent credit rating, is to get the money at the lowest possible cost so that you can settle the loan after paying the minimum possible amount.

The answer to 'why have you been conned into this' is that when the chance came up to borrow the money from Shawbrook you didn't bother to see what would be the lowest possible cost for borrowing the money elsewhere, or try to borrow the money over a short period so that you would be clearing it in a short space of time and avoiding unnecessary interest, or even try to multiply the monthly payment by 120 months to see what you would pay in total over 10 years and notice that it was more than twice the amount borrowed.

It seems you only thought to do all that when you were two years down the line, which is way too late to say 'hold on, I don't want this loan at this expensive price'. You could probably have done that during a short cooling-off period after signing your name against the figures and the terms, if you had read it and got shocked at that point.

Where do I stand? Can I complain to ombudsman about this

"I didn't think to read how much it would cost, I just signed my name next to the bit which said I had read and understood what it would cost, and only thought about what that meant a couple of years later" is not a valid complaint.

When they offered you the loan they did not guarantee it would be the absolute cheapest loan you could possibly have got for your personal circumstances. They were not giving you independent and unbiased financial advice. They sold you a loan product which you said you wanted to buy, because at the time you thought you wanted it and it was good value.

It is a good lesson for other people on this board though, so thanks for posting it.

or is it better to try and secure new loan either with shawbrook or elsewhere?

As an example if you borrowed £7.5k over 10 years at 18.9% you are probably repaying something like £132 a month.

If you go to https://www.sainsburysbank.co.uk/borrowing/bor_borrowing_zone and put in £7500 over 60 months (five years) the loan would cost a little over £134 a month (2.9%).

So, if you took out a Sainsbury loan you could use it to pay off the Shawbrook one early and the Sainsburys one would be paid after five years (total payable £134.31 x 60 months = £8058) instead of continuing for eight years at a similar amount and paying over twelve and a half grand.

Whether Sainsbury will actually offer you a rate as low as 2.9% when you submit the application depends on your credit score, but to advertise the rate they have to offer it to at least half the people who apply. Even a higher rate would still be better than the current arrangement.

Note that the low Sainsbury rate of 2.9% is only available for loans of £7.5k or more, so even if you only need to borrow a smaller amount (e.g. £6k) to pay off Shawbrook, if you have a good credit rating it might still be worth borrowing £7.5k and making occasional overpayments, instead of borrowing the exact amount you need and being stuck on a higher rate of 4% or more for the next five years.

tpook82

No thanks for the posts everyone.

Hindsight is always a good thing. I suppose thought was getting a good deal at the time.

Will be looking into shifting the debt though as don't fancy paying twice what I'm.borrowing

-taff

Well, think positive, you probably won't do that again.

Ben8282

10 years is a very long term for a £7.5k loan. That in itself should have rang alarm bells when it comes to interest.
Anyway, there is no point in dwelling on your mistake.
The best thing now is to try to remedy the situation.
If your credit rating is as good as you think it is, then apply for a 0% money transfer card and repay the loan.
Then concentrate on repaying the card during the 0% period.

[Deleted User]

I would probably talk to my bank see what terms they could offer on a loan.

takman

tpook82 wrote: »

No thanks for the posts everyone.

Hindsight is always a good thing. I suppose thought was getting a good deal at the time.

Will be looking into shifting the debt though as don't fancy paying twice what I'm.borrowing

This is definitely not a case of hindsight you had all the details infront of you when you chose to sign it and could have paid it off at any time after that. You just need to understand what your signing up to before you agree to financial products.