Advice on AA APR increase

ajn1610

Hi,
I'm seeking some advice. Yesterday, after researching on here I applied for the AA members loan for £20,000 at 2.9% APR and passed the soft check.
On receipt of an email the actual loan arrangement is 9.8% APR and over £100 more in monthly payments. I rang AA to question this, they told me the representative rate can change, which I know, but to me this seems an excessive hike. I asked to cancel the application and was told this wasn't possible, I had to wait till funds were in my account and then return them. I'm a bit !!!!ed off to be honest, as this will obviously leave a footprint on my credit file. I'm in a very good position financially, we are a two income household with over £75k before tax, we own the house out right and have no dependents and only about £6k in credit card debt and car loans. I don't understand why I have attracted this significantly higher APR. The loan is to replace a kitchen and bathroom prior to selling the house, so I am expecting to repay early and have checked there is no fee for this. So my question is, do I return the funds, and shop around but risk further effects on my credit score by more checks, or do I accept this loan and pay the larger monthly fee expecting to be able to clear the loan early and therefor not attract the full repayment amount.

foxy-stoat

You should be able to stop the application as I assume you haven't accepted the higher rate.

The fact that you have a "foot print" as you put it is nothing to get !!!!ed off about as they would of make an application which would of left a search - what is there to get !!!!ed off about?

If you are planning on repaying early once you sell the house then the amount of additional interest would be negligible, in the scheme of house buying and sell.

You have the right to apply to another lender, you may or may not get a better rate.

You do not have the right to know why you were not one of the 51% of applicants who were lucky enough to get the headline rate.

DCFC79

Your credit score is only seen by yourself, lenders see your history.


Try another lender, AA are entitled to offer the rate they did.

ajn1610

Foxy-stoat thanks for the reply. The reason it has annoyed me is because I did not have sight of the higher APR or monthly repayments until this email, despite reading all the terms and conditions, and I've been told that I cannot now withdraw from the process. I know the APR can change after a hard check, but I was not expecting a three fold increase, particularly in my situation.

DCFC79

ajn1610 wrote: »

Foxy-stoat thanks for the reply. The reason it has annoyed me is because I did not have sight of the higher APR or monthly repayments until this email, despite reading all the terms and conditions, and I've been told that I cannot now withdraw from the process. I know the APR can change after a hard check, but I was not expecting a three fold increase, particularly in my situation.

Give at least 1 more lender a try.

BoGoF

I find it hard to believe that no mention was made of the APR before you accepted the loan. Every loan I have ever applied for does so before acceptance.

Are you sure you didn't miss this?

foxy-stoat

BoGoF wrote: »

I find it hard to believe that no mention was made of the APR before you accepted the loan. Every loan I have ever applied for does so before acceptance.

Are you sure you didn't miss this?

According to their site

By clicking ‘Find out my eligibility’ you are agreeing to let us look at your credit file and carry out an affordability check to see if we can offer you a loan. We will use this information to give you an indication of whether we are likely to accept your application and if your application was to be successful, a representative APR and monthly payment amount.

This check will only be visible to us. Other lenders won’t know that you have checked your loan eligibility with us and your quote will not affect your credit score.

Once we have given you your quote, you can choose to continue to a full application. At this point you will have a full credit search carried out that will be stored on your credit file and will be visible to other lenders.

So by going to a full application you have effectively accepted whatever rate they give you, so you have to pay it back within the cooling off period. Rubbish way of doing business, not sure if its within the financial code....but the code may be more like guide-lines.

ajn1610

It's possible that I missed something, but I read everything very carefully. It certainly was not made clear that I was being offered 9.8% APR, at £100+ more a month and with a much higher repayment total, on any of the documents. I wouldn't have proceeded with the application under those terms if I had been made aware.

ajn1610

foxy-stoat wrote: »

According to their site

By clicking ‘Find out my eligibility’ you are agreeing to let us look at your credit file and carry out an affordability check to see if we can offer you a loan. We will use this information to give you an indication of whether we are likely to accept your application and if your application was to be successful, a representative APR and monthly payment amount.

This check will only be visible to us. Other lenders won’t know that you have checked your loan eligibility with us and your quote will not affect your credit score.

Once we have given you your quote, you can choose to continue to a full application. At this point you will have a full credit search carried out that will be stored on your credit file and will be visible to other lenders.

So by going to a full application you have effectively accepted whatever rate they give you, so you have to pay it back within the cooling off period. Rubbish way of doing business, not sure if its within the financial code....but the code may be more like guide-lines.

Yes, seems that way. I have to say I feel this is extremely misleading. I'm in a fortunate position, I can cover the extra monthly repayments and because I'm not intending on taking the full repayment time it won't actually make that much difference to me, that would have been a major issue for some borrowers though. I think it ought to be made more clear that the actual APR can be so far from the representative one, as I said I know they can change but I wasn't expecting such a huge difference.

BoGoF

So did the eligibility check definitely say the rate may be 2.9%?

foxy-stoat

ajn1610 wrote: »

Yes, seems that way. I have to say I feel this is extremely misleading. I'm in a fortunate position, I can cover the extra monthly repayments and because I'm not intending on taking the full repayment time it won't actually make that much difference to me, that would have been a major issue for some borrowers though. I think it ought to be made more clear that the actual APR can be so far from the representative one, as I said I know they can change but I wasn't expecting such a huge difference.

If the full loan is paid back in the cooling off period then no interest would be paid - it is an unfair practice as it does not give you an opportunity to decline the loan when have been offered the final rate.