Need A Loan? Guess The Interest Rate
Monday, November 06, 2006
How do you find the best interest rates if you're planning to
apply for a loan? Until relatively recently, it was simple.
There were plenty of lists of comparative rates published in
table form on various websites. You could take your pick and
investigate the terms of the cheapest lenders. This approach is
not so easy any more.
Many banks are choosing to use a new system where the rate
offered is dependent on your personal credit profile. At first
glance, this appears to be a very fair system, but in fact
would-be borrowers will have no idea of what interest rate
they'll be offered and so will be unable to make comparisons.
The Halifax, HSBC and Bank of Scotland have all switched to
personal pricing and no longer advertise typical rates. In
fact, most of the twenty leading lenders have adopted this
method. The result of this is that customers applying for a
loan will have very little idea of what rate they'll be
offered, or whether they'll be accepted. This is a ridiculous
situation as no should have to go "blind" into a credit
application without a good idea of the interest rate.
It's difficult to find out the rates by multiple loan
applications, as each credit application is marked on your
credit file. Lenders are understandably concerned where there
have been excessive searches carried out and therefore the
apparently simple process of achieving the best rate for your
loan could affect your credit rating!
Even applying to your present bank for a loan will still
require a credit check, but you may be able to gain some idea
of what the interest rate is likely to be and most banks would,
presumably, like to keep your business.
A representative of one of the leading banks has said the
lending is on dangerous ground at present and that there are
huge debt problems in the UK. Because of this, loan
applications are increasingly likely to be rejected.
Where banks are still advertising headline interest rates it
appears that lenders are failing to follow through with offers
to a high proportion of applicants. Those who are successful
are often offered a higher rate than the one advertised.
The Consumer Credit Act 2004 stipulates that lenders who
advertise loans using a typical rate must lend money at that
rate to at least 66% of successful applicants. Obviously by not
showing a commitment to a rate, lenders can evade this rule.
A recent survey showed that, of almost 3,000 people who applied
for a loan, 40% were refused almost immediately and 25% were
accepted without delay. However some days later the remaining
applicants were still waiting for a reply and it is expected
that a further 17% will fail to be granted the rate they
applied for.
There are a great many people applying for loans with the
lowest headline rates and very many of them are going to be
disappointed. Doubly so, as with every rejection they are
putting the chance of obtaining a loan from another lender in
jeopardy.
A browse through the internet will find you an advisor who
should be able to offer some guidance and help you to avoid any
nasty surprises.
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posted by Dennis Cheesman @ 5:33 AM,
