Are you looking for the best loan rates?
If so, it could be about to get more difficult to secure the very lowest personal loan deals. New rules
set to come into force this February mean that the proportion of applicants who need to qualify for
a particular interest rate deal in order for it to be advertised will drop to just 51 per cent.
The Daily Telegraph reports that ‘given that about 70 per cent of loan applications are declined, the
number of applicants being offered a loan at the advertised rate could be as low as 15 per cent.’
Changes to European law likely to affect borrowers
Part of the European Consumer Credit Directive, this change is likely to affect many borrowers. This
is because many banks and building societies have adopted ‘risk based pricing’ whereby your credit
history determined that interest rate that you will pay.
The Daily Telegraph reports that under the current rules, for every one hundred people who apply
for a loan in the UK, only thirty are accepted. And, of these thirty, only two thirds receive the
interest rate that is advertised (20 per cent of the total applicants).
From February 1st, when the new rules are introduced, just 15 people will have to receive the rate
that is advertised.
Understand your credit file before you apply
If you are planning to apply for a personal loan, it is therefore vital that you check your credit file
to ensure there are no black marks such as missed or late payments. Anything other than a perfect
credit file could mean you pay a much higher rate of interest for your borrowing.
Whilst the new rules mean that even less people will benefit from the very lowest loan rates
advertised by banks or building societies, there is some good news. If a lender rejects your
application after February 1st, they are obliged to tell you why. If the refusal has something to do
with your credit file, the lender must tell you which credit reference agency they use and how you
can get in touch with them.
