New application or accept higher rate?

b_real

I've just applied for a £13k loan to pay off my car which is coming up to the end of its contract purchase period. So I can keep my car.

I went through the MSE Loans Eligibility Calculator and went with Admiral because it was the one with the highest chance of being accepted (95%) and also had the lowest representative APR rate of 2.9%.

They offered me 8.7%.

Uh, wait what? This is 300% higher than the advertised representative rate. I understand that only 51% of applicants get the advertised representative rate, but I didn't know that landing in the remaining 49% put you in such a high interest rate zone. My questions are:

• What decides whether you fall into the 51% that get the representative APR, or the remaining 49% that get utterly shafted?
• Is a differential of 300% between representative rate and actual offered rate normal?
• Most places only report the representative rate. Does anywhere report the non-representative rate?
• Am I better off refusing 8.7% and applying somewhere else for a new loan? The downside to this as I see it are twofold: 1. Incurs more hard searches on my credit file, and 2. Might get an even higher rate at the next place. Or do I just bend over and accept 8.7% for a £13k car loan.

My credit score with Experian is 999 (highest), I'm using about 30% of my total available credit, and my salary is around £60k with no dependants. So I think I'm in good shape credit history wise (never defaulted, plenty of successful history).

b_real

I spoke to Admiral. On my first question, it seems they base the decision on a combination of 1. your credit file, 2. your personal details (assuming salary, dependants etc.), 3. "Businesss rules" around underwriting.

This 3rd one is obviously where all the hocus pocus goes on. Does anyone actually regulate whether truly 51% of applicants achieve the representative APR?

Also, Admiral don't use Experian to base their decisions on, they use Equifax and the other one, so my score might be different with them. Would be really useful to know which one they use prior to the application.

Still really keen to know if its worth applying somewhere else before accepting this one...

[Deleted User]

They don't use any of your CRAs scores. They'll only use your credit history and current circumstances.

Check your three credit files and none of the scores. That may give you an idea of why you're higher risk.

You're correct that 51% or more of successful applicants will get the headline rate.

foxy-stoat

Firstly, congrats, I think you are the first this week to complain about not getting the headline rate.

You need to do another application with a different lender to compare the 2 rates and go with the lowest interest rate.

I do not believe the percentage of successful applications for the lowest rate is regulated as they are offering a service - I do not think Coop are regulated when they offer a multi packet of Twix bars for £1 some of the time, and randomly the price increases to £1.75.

MallyGirl

It is worth one more application, once you have checked your credit history as held by all 3 CRAs.
It is possibly down to affordability - as a singleton on £60k maybe having some savings would be an idea, unless the £13k is a loan on top of a contribution you are making from savings.

b_real

Deleted_User wrote: »

They don't use any of your CRAs scores. They'll only use your credit history and current circumstances.
Check your three credit files and none of the scores.

What's the difference between your 'score' and your 'file'? I thought the score was based on your file?

Will the MSE 'Credit Club' give me enough information from each CRA for this?

boo_star

b_real wrote: »

What's the difference between your 'score' and your 'file'? I thought the score was based on your file?

Will the MSE 'Credit Club' give me enough information from each CRA for this?

Your "file" is simply factual information about how you manage your finances.

Your score is a made up number that may but in all likelihood won't reflect how a lender will view your creditworthiness.

b_real

MallyGirl wrote: »

It is worth one more application, once you have checked your credit history as held by all 3 CRAs.
It is possibly down to affordability - as a singleton on £60k maybe having some savings would be an idea, unless the £13k is a loan on top of a contribution you are making from savings.

Thanks. I've got savings, I just don't want to use them to pay a car off. I appreciate that its a bit more expensive this way, but I would rather have my savings where they are in case I need to access them for emergencies.

The affordability question is a bit ironic. I've been paying £350pm for this car for 4 years now, and the balloon payment will now mean my monthly payments is reduced to around £260pm to service the loan (at 8.7%). It's almost as if the loan company's 'business scoring' system knows I can afford a higher rate so it's taking advantage of me!

b_real

foxy-stoat wrote: »

Firstly, congrats, I think you are the first this week to complain about not getting the headline rate.

You need to do another application with a different lender to compare the 2 rates and go with the lowest interest rate.

I do not believe the percentage of successful applications for the lowest rate is regulated as they are offering a service - I do not think Coop are regulated when they offer a multi packet of Twix bars for £1 some of the time, and randomly the price increases to £1.75.

Not sure if your opener was sarcastic or not but I'll go with not, so thanks

Also not sure what the price of a twix has to do with anything. A twix on offer at £1 is available at that price to 100% of people who try to buy it in the offer period. A loan that is advertised at 2.9% is only available to 51% of people who try to buy it in the period its on offer, is potentially false advertising! Something must regulate whether they are actually giving 51% of applicants this rate, otherwise they could be telling porkies.

boo_star

b_real wrote: »

Not sure if your opener was sarcastic or not but I'll go with not, so thanks

Also not sure what the price of a twix has to do with anything. A twix on offer at £1 is available at that price to 100% of people who try to buy it in the offer period. A loan that is advertised at 2.9% is only available to 51% of people who try to buy it in the period its on offer, is potentially false advertising! Something must regulate whether they are actually giving 51% of applicants this rate, otherwise they could be telling porkies.

Presumably the FCA, although I doubt they actively monitor all lenders.

Jami74

b_real wrote: »

Am I better off refusing 8.7% and applying somewhere else for a new loan? The downside to this as I see it are twofold: 1. Incurs more hard searches on my credit file, and 2. Might get an even higher rate at the next place. Or do I just bend over and accept 8.7% for a £13k car loan.

Why don't you quickly apply for a loan elsewhere before deciding whether to accept or decline the 8.7% loan?

I applied three times for a loan. First took me by surprise at 10.something %, second was 6.9% and third was 12.something %.

A couple of searches on your credit file shouldn't do any harm. I've had a few recently and my 'score' is currently in the low 500s. It didn't stop me getting another product last week. I expect never missing a payment helped.