Loan Offers to Avoid - page 2

How loan companies advertise their rates

Legally loan companies are forced to illustrate their loan rates in a certain way, but this be misleading to some people.

This method of offering personalised rates is not illegal, but shows scant regard for the intentions and spirit of the Act. Lenders can adopt an innocent air and point out that notices in branches and advertisements do indeed quote a typical APR, but at the same time they are often contacting customers direct through online banking or postal leaflets, making direct offers of personally priced loans.

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A customer responding to these offers is not answering the advertisement with the details of APR, and is thus outside the somewhat precarious protection offered by the Act. Lenders are always careful to state that rates offered are 'subject to status' which leaves them free to go firm on higher costs if the potential borrowers credit record does not justify any lower rates mentioned.

The main trouble here is that whilst 'typical rates' are supposed to give borrowers a reasonable indication of what they could expect to pay, without leaving a 'footprint' on their record, in practice this proves to be impossible. A lender will not quote a firm rate until your credit record has been checked, and if their offer is not accepted then the borrower is building up a footprint collection on their record. This in turn is likely to lead to less acceptable offers, either in terms of the amount which will be loaned or the charges which will have to be paid.

This vicious circle can reach the point (due to the number of credit checks made) where a satisfactory quotation cannot be obtained because, as far as any lenders are concerned you have made frequent requests for a loan but have not actually been successful with any of them.

In complete innocence you have acquired a black mark on your record which will be difficult to get rid of. Perhaps the safest route to take for a loan would be to ignore any offers of loans at 'personal rates' and opt instead for the known and quoted APR as advertised. If this should be refused and the lender claims the grounds that they have met their '66% quota', this may well be the time to call their bluff and involve the OFT.

Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required. Think carefully before securing other debts against your home.

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