Personal Loan Rates
It's a Loans Rate Trap - Have You Been Caught?
Summary: Watch out when looking for a personalised interest rate - you may be picking up more than helpful advice. Make sure you don't end up with a footprint on your record that raises your future loan costs.
There is a sales trick as old as the hills, and known across the world. Whenever canny salespeople are gathered together, this little confidence-booster is sure to arise. It's very simple: make the customer feel special, different from all the other run-of-the-mill clients, with a personal deal "just for them". Not something your bank would stoop to, surely? Yet many banks have been going against the strict ruling of the Consumer Credit Act, designed to protect customers from just such dealings.
The Act specifies that 66% of customers who apply for a loan must be offered that loan at the advertised annual percentage rate (APR). Reasonable enough, you might think, since this is most likely what drew them to the loan in the first place.
The administration of this Act is in the hands of the Office of Fair Trading (OFT). Unfortunately, the volume of loan agreements entered into every day is such that they are unable to check every one, although they do follow up all direct complaints. So many companies are operating without this customer safety net fully in place.
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While this may be understandable, the OFT depend instead on information from individual loan applicants. The flaws in this system are easy to see: each loan client will only have information relating to their own loan, not others', and they will thus be unlikely to spot flaws in the bigger picture. How do you know if your loan is "normal" with nothing to compare it to?
Sadly, there is evidence that the Consumer Credit Act is being sidestepped, but how? Banks and finance companies may advertise a specific APR, and clearly display all the loan rates and associated charges. Then they will approach a customer they know to be a likely candidate and offer them that special, personalised deal we mentioned earlier - "designed just for your specific needs". If a customer responds to this offer, they are not applying for the advertised loan (with its clearly labelled APR), but a different package altogether.
