Personal loan offer was not at advertised rate

MABLE

bigisi wrote: »

Obviously not too much style if you're only spending £24k on a new car.

Jealousy will get you know where. There is nothing wrong in driving a Reliant Robin. :rotfl:

vacheron

I've noticed many people on this thread have referred to a car as an asset, or as a "depreciating asset".

I accept that at any particular moment in time a car will have a monetary value which can be considered as part of an individuals net worth, and so it is the general term often used without thinking, however (as per my long standing MSE forum signature) I believe cars should be referred to as a "depreciating liability".

A car (or at least 99.9% of them) provide no ongoing financial benefit, they depreciate to zero value, require a significant ongoing investment to keep them operational, cannot be liquidated quickly without incurring further loss and are often purchased using expensive financing and/or ongoing tie-in plans.

I've personally known many people who have referred to buying cars as "assets", including car dealers. I guess it makes justifying the initial cost easier.

I am not saying do not buy cars (though in the OP's case it does appear that they are overstretching themselves), I have a couple of "More than minimally functional A-B" cars slowly depreciating on the driveway as I type, however I am realistic in the fact that they are an awful investment from a financial perspective, and for this reason I psychologically write them off as having zero value the second I purchase them and would never consider them as any kind of asset.

MEM62

The term asset generally refers to something of benefit. That benefit does not necessarily have to be financial. It has a wider meaning than that.

In accounting terms it is an 'asset' in that it requires an investment of capital and you own it. In terms of its classification as an asset the fact that it produces no direct financial benefit is largely irrelevant and also not strictly true. It does not need to generate income merely by the fact that it is sitting on your drive. As one example, the benefit can be that it allows you to earn income as you cannot get to work without it. Hence you have a financial benefit.

It should be treated as a depreciating asset for two reasons, the main one is that, eventually it will need to be replaced and the depreciation is the sum that must be accrued by the time the vehicle is at (what is by any criterion that you have set) it's end of life and needs replacement. If planned for properly, the sum put aside for the replacement will match the amount that the car has depreciated at any point during your ownership.

I do see your point of view. Looking at it that way will lead you to make more prudent decisions and I have a similar approach but I take the term asset in the wider context.

iolanthe07

Exodi wrote: »

Can someone make a 'Why You Didn't Get The Headline Rate' guide and sticky it to the top of the board?

This question comes up every other day. I'm pretty sure the eligibility calculators don't even ask you about outstanding debt before telling you you're 95% sure to be accepted at 1% APR.

Pick your answer:

[_] Credit ratings are made up and you're not as attractive as you think
[_] You have outstanding debts
[_] You have negative information on your credit file
[_] You're not in the lenders demographic

You might add another: The lender has already fulfilled their 51% low finance target for the month/year/quarter.

Exodi

iolanthe07 wrote: »

You might add another: The lender has already fulfilled their 51% low finance target for the month/year/quarter.

I was thinking of adding the lender hit quota, I've actually been really curious about how this works in practice.

Eg, Mr Lender forecasts that he receives 100 applications in a certain period - he calculates that he'd need to accept 51 applications to conform. I won't include the scenarios where there are lots of 'prime' candidates as I'd imagine Mr Lender has no issue going above 51% however, the few difficult situations;

a) Mr lender received 49 horrendous applications, all with low incomes and with huge debts and decides to offer them all much more than the headline rate in line with their risk. Mr lender then needs to give the headline rate to the following 51 applicants irrelevant of circumstances to conform.
b) Mr lender receives far less applications than he forecasted, and after offering a higher rate for the first half of the period, finds himself in a situation where he again, will need to give the headline rate to any subsequent applications.

To avoid the above scenarios, Mr lender would surely 1) Change the lending criteria throughout the period and 2) Accept sub-prime candidates at the start of the period to bolster the percentage. This would then create a strange situation where you're more likely to be accepted at the start of a period than near the end.

Sorry, just thinking out loud.

kelevraz

Literally in the exact same position lol

I applied for £6000 at what i thought would be a rate of 3.7%

Got the offer through the door at 12.9%...

Could still afford the monthly repayments, but its massively changed the situation. Wont bother taking the loan now

Anyway, i can tell you from where i work, that this is something that happens literally all the time, and many of the reasons that have been posted above are true.. although, no lender would ever admit to any of these reasons lol

Its actually a pretty common (and almost justified) complaint that we see every other day. ' I wouldn't have applied for this loan and put a mark on my credit file if i'd have known they were going to offer me a rate much higher than what was advertised'

Dunno why people are commenting on the amount of money you want to spend on a car? Im yet to find a person who can completely justify the price they spend on the things in their life when balancing against their income, but whatever

OP, for future reference - your credit 'score' doesn't matter, it's the information actually on your file that matters. As you said, you have outstanding finance and credit card debt, so its not completely surprising you didn't get the offered headline rate.

majicka

Ben8282 wrote: »

With an existing loan you are very unlikely to get a headline rate. on a second loan. The outstanding credit card balance will also affect the rate you will get, especially if not at 0%.

Interesting. I’m yet another person who applied for a loan to buy a car, expecting to be offered the headline rate or something near to it, and was surprised to be offered a far higher interest rate.

Clearly every case is different, but do you think having an existing loan would be a bigger factor than existing credit card debt in determining whether an applicant got anywhere near the headline rate? I have a loan which I have almost paid-off but there is a penalty to clearing it early; my credit utilisation rate is below 30%, so perhaps that may have been more important.

Oh well, I’ll just need to wait a few more months before trying again.

robber2

kelevraz wrote: »

Dunno why people are commenting on the amount of money you want to spend on a car? Im yet to find a person who can completely justify the price they spend on the things in their life when balancing against their income, but whatever

Theres a clue in the name of the website we are on


Rob