Online loans advertised rates are simply a phishing con trick

nubian

My kids recently applied for loans using the MSE calculator and had returned searches offering rates from 3.2%. to 4.1% and 70 % and 90% acceptance from the AA one loan being 12000 over 5 years and the other 5000 over 2 years.


On both occasions the rates when they put through the application were bumped up from 3.2% to 14% and the other from 3.2% to 12% This was done only after they proceeded to the full application stage. Out of interest.


I put in a search I have a A++ Credit rating and it returned a 98% acceptance rate on AA at 3.2% when I continued the rate jumped to over 9% I know that I now have a credit search on my file but I refused the loan and asked for an explanation of this loan shark like activity, not surprisingly I got no where but I do now know this goes on right under the noses of MSE and it needs to be challenged.


It may be legal but it is unethical, these companies are fishing for takers then giving them a "fait accompli" situation where they are coerced into taking the high rate to get acceptance and avoid negative impact on their credit rating.


This was pointed out when my daughter rang AA loans to complain and get an explanation high % of acceptance with 3.2% interest suddenly became over 14% no explanation was given the "customer service " person was quite rude and just said even if she didn't accept the application offer the search would remain on their credit file. Help MSE! this practice needs to end.


If they advertise acceptance percentage at the advertised rate is high they must produce a very good reason why they then bump it up by over 225% adding over £5000 to the interest she would pay back over the term. It is scandalous!

Willing2Learn

Sorry to say, but you are misinterpreting the advertised rates. The rates you see initially are the representative interest rates, and these are only offered to 51% of borrowers. The rate offered is dependent on the borrowers credit file (plus the data submitted in the application).

If you read the small print throughout the application, it clearly states that the interest rate is subject to status.

kwame41

Nothing MSE can do about it.

As I understand it you can order your search by APR / chance of approval etc.

The APR listed does not guarantee you will get the loan at that rate. The company will base the rate they offer on your personal circumstances / internal rules when you actually apply.

Some people do get the advertised rate, some don't its always been the same.

Loan sharks charge interest in the 1000's% apr like payday lenders for example.

[Deleted User]

With those sort of downsell rates, they need to work on building a better credit history and lower their risk levels to lenders.

Tell them to have a look at their credit files to see what appears. And of course tell them to ignore any A+++ triple star gold rated credit ratings than anyone gives them.

nubian

Both have good credit ratings they are young people yes but both have decent jobs. As their Dad I put a search in to see what happens and bear in mind I was recently pre- approved by a major high street bank at 2.1% for a loan of 20k. I got bumped up to over 9% and my credit rating is as high as it gets.


It may well be legal and the small print protects these companies whilst their sharp practice drives these applicants to take the higher rates A) because they need the finance, Daughters case for a new car to support her work and to avoid a negative credit file entry.


When I asked for a reason why I couldn't get the advertised rates and I was 98% Likely to be approved, they would not tell me and I reminded them I have a faultless decades long credit rating with Experian and two others similar companies. So there appears no reason that I should be bumped up 150% other than exploiting their power and an already hooked fish.


I am not saying MSE can do something about this bit there is something here that smells of quiet exploitation and it is going under the radar.


When you search for an insurance quote and put in personal details you get a price and that is the price you pay, why shouldn't this be the case for loan companies instead of advertising rates that hardly anyone gets and I challenge them to produce the evidence to the contrary.


The calculator needs to be much clearer about what it is telling people and the rate that can be expected should be up front from the moment the application begins not when they get to the offer stage.


It puzzles me why some respondents here are more concerned with advocating for the loan companies rather than seeking more fairness and openness on behalf of potential customers.


Strangely I was warned by my high street bank that this would happen and we tend not to trust these people very much, at least they were honest.

[Deleted User]

You still seem to be using the pretend credit ratings as a guide to how lenders assess their risk. There is little to no correlation.

Lenders will be looking at credit history, income, affordability, existing debts and so on.

kwame41

I dont think the OP is prepared to accept the facts of the matter.

You think you are being treated unfairly, your not.

Lots of factors in play regarding your offered APR it just the way it is.

nubian

So why the disparity then, many I have contacted use Experian, I have had no problem with credit applications of which I have had many without missing a payment. I should easily meet the criteria as a home owner with a long excellent credit rating in a high paid job etc.. But he AA bumped my application rate up by 150% with no explanation. They hide behind their criteria and use this as a mechanism to increase rates while they have a potential customer hooked IMO. Both my kids are in work and have a decent credit rating yet one had the rate bumped by over 300% and the other by over 225% for Car loans which if they defaulted would certainly be repossessed. Sorry but something smells here

Willing2Learn

They lenders clearly state actual APR is subject to status, many times, throughout the application process.

At best, it could be argued that it is not as clear as it could be, and a touch misleading. At worst, it could be argued that some borrowers are not as observant as they need to be. Personally, I go with the latter

forgotmyname

Good credit ratings according to who? Seems you/they do not have the criteria to get the lowest APR they offer.

Are you/they a home owner? Are the loans for less than 1% of your/their income? Less than 5%? Less than 40%?

Are the loan payments 1/4 of what their surplus income is each month? ie. if the loans £250 a month do they currently have over £1000 of free income or will they have over £1000 free after the loan payments have been taken?

Who knows what their criteria will be, obviously you dont fit into that category.

Maybe they want people who take lots of credit year after year, or maybe someone who only needs a short term low value loan?

nubian

Well if you don't challenge the status quo nothing changes, which I understood to be the premise of MSE just because as you put it "its the way it is" doesn't make it fair or right. If there was clarity in that these companies had to disclose why you were turned down or why the rates were increased by 100's of % points on demand, there would in my opinion be many more people being approved at nearer the mythical advertised rates.