Personal Loan Rates - page 2
Lenders show their typical APR as a guide only
Applicants cannot expect to be offered a loan at the typical APR. Some offers will be higher but many will also be lower.
If the customer agrees to a quote, the lender will conduct a credit check before confirming the personalised rate. Doing this causes a mark to be stored on the customer's credit record, indicating that a credit check has been made. This is sometimes called a footprint, as it indicates that someone else has been there! So any future checks will show that a credit check has been carried out. Unfortunately, this is unlikely to be interpreted in the best light by other companies. Here's how it works:
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A person with an untouched credit record, with no footprints to be seen, is most probably someone who has never taken out credit before. This will be interpreted as a sign of a good financial history, with no previous need for major loans and excellent budgeting skills, so repayments are not in danger. All things a lender wants to see; so, out with a shiny new low-cost loan rate!
However, if your credit record is as merrily scattered with footprints as a sandy summer seaside, the lender is not going to share in a spirit of celebration. They will assume that, if you have made many credit enquiries, you do not have the ability to manage your finances well, and may even have outstanding payments on any loans you do have. They will see your record as an indication of a high-risk client and offer you a much higher interest rate, to reflect the level of risk they perceive.
Because there is no way to distinguish between "good" and "bad" footprints, a footprint is clearly something you'll want to avoid. And just by taking up an offer of a quote for a special deal "just for you" you'll end up with one right where you don't want it - where it can be seen by every future lender you approach.
So when you see a loan with a clearly advertised APR, and get offered a special one-off deal, which should you choose? The personalised rate may be lower, but it will result in a potentially costly footprint. Weigh the options carefully. Remember that it is quite legal to offer you a rate that varies from the one advertised (provided you are not one of the 66% !), which could be higher or lower than the stated APR. If you do take up a personalised offer, it will show the exact rate you pay, or one very close to it, but will come with a footprint attached. Being aware of this could save you a lot of trouble - and money - in the future. Don't get caught in the rate trap!
