Loans at 2.7/2.8 % APR

davep12345
davep12345 Posts: 35 Forumite
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Hello,

I m looking for a loan of 14000 over 60 months, and having looked at ML's section on loans some are advertised at the low APR rates, but why is it that they are only offered to 51% of applicants. ? I've tried applying for a couple but never get the advertised rate.
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  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    edited 3 April 2022 at 8:24PM
    Because the legislation dictates that at least 51% of successful applicants get the headline rate 

    If you're not getting the headline rate, it's because your risk is too high. Aim for a higher rate lender.

    You should also consider whether you need such a large amount, as you'll need a good income to support it.
  • Exodi
    Exodi Posts: 2,856 Forumite
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    edited 4 April 2022 at 1:50PM
    It's to do with marketing legislation.

    It's to prevent lenders either:

    a) Advertising 'GET YOUR 0.1% APR LOANS HERE' - while in reality only offering it to one person, and giving everyone else a much higher rate, hoodwinking everyone that applies and also hindering their ability to look elsewhere (as they'd now have a hard search on their file).

    b) Forcing them to give the loan to 100% of applicants that meet affordability. Lenders have preferences to who they lend to and they deem that certain applicant characteristics are riskier, and would want to change a higher interest rate to offset this risk. If they had to give the rate to everyone that applied, they'd have to hedge their books by increasing the overall interest rate - which isn't good for less risky consumers.

    All in the all, the current approach is the best compromise - works well for those who do fit the criteria, and also provides options for those that don't.

    The main discontent on these forums about the matter, is from people that think they are well off because they have a 999 score on experian, and are disgruntled to find they are not eligible for the 2.8% loan they planned for!
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  • MrFrugalFever
    MrFrugalFever Posts: 1,231 Forumite
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    Exodi said:
    It's to do with marketing legislation.

    It's to prevent lenders either:

    a) Advertising 'GET YOUR 0.1% APR LOANS HERE' - while in reality only offering it to one person, and giving everyone else a much higher rate, hoodwinking everyone that applies and also hindering their ability to look elsewhere (as they'd now have a hard search on their file).

    b) Forcing them to give the loan to 100% of applicants that meet affordability. Lenders have preferences to who they lend to and they deem that certain applicant characteristics are riskier, and would want to change a higher interest rate to offset this risk. If they had to give the rate to everyone that applied, they'd have to hedge their books by increasing the overall interest rate - which isn't good for less risky consumers.

    All in the all, the current approach is the best compromise - works well for those who do fit the criteria, and also provides options for those that don't.

    The main discontent on these forums about the matter, is from people that think they are well off because they have a 999 score on experian, and are disgruntled to find they are not eligible for the 2.8% loan they planned for!
    The system just reconfirms once again that money goes to money....I understand that affordability and risk has long since been used to determine lending amounts and interest rates but if someone requires credit for a very valid reason but has low affordability the issue shouldn’t be compounded by slapping them with a higher APR. The system won’t change though - just thinking out loud!
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  • gwrach
    gwrach Posts: 12 Forumite
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    I have just been turned down for a loan by Santander.  I only wanted to borrow £1000 and apparently the reason for my loan was why they turned me down.  The reason I gave was that food prices were increasing. I think they will getmany requests for this reason, in future. I am seriously thinking of going to another bank.  Can anyone recommend a bank that deals well with Lasting Power of Attorney for health and finance.
  • gwrach
    gwrach Posts: 12 Forumite
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    Forgot to say I have never been in debt, and I am £11K in credit in my current account.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    Use £1000 from your savings rather than getting a loan. 

    It's unsurprising you were rejected on the basis of the reason you gave, as if you can't afford food, you can't afford the loan.

    What do you mean by a bank that deals well with LPOA? In what regard?

  • gwrach
    gwrach Posts: 12 Forumite
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    As far as the LPA goes, I hope whichever bank I go to makes it easy.  You'd be surprised at the hoops I have had to jump through.  Of course I can afford food, I could have lied to the bank and said the loan was for something else.  Of course I can afford the loan.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    But who is the LPA for? Are you applying on behalf on someone else? Or vice versa? Who is who lacks capacity?

    If you can afford food, why did you say the loan was for rising food prices? What is the real reason for the loan?
  • gwrach
    gwrach Posts: 12 Forumite
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    My husband.  He had a stroke and now has cognitive issues and can't speak at all.   Iwas just trying to keep ahead of things.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    As long as you have the LPA document to hand (not all banks will accept online codes), you'll be fine with any bank. 

    However, you'll probably find it easier to use it with his existing bank and then apply for a loan with them, rather than try to do it through a new provider.
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