Small amount of loan applicants to enjoy advertised rate
More UK borrowers might find themselves paying even higher rates of interest than those advertised on both loan and credit card advertisements once new rules are implemented next month.
At the moment, lenders are able to advertise specific interest rates if they expect that at least 66% of borrowers will be able to qualify for it. However, under new European rules that come into force on the 1st of February, the majority of applicants that need to qualify for deals in order for the offer to be advertised is going to drop to 51%.
Considering that around 70% of loan applications are usually declined, the amount of applicants currently being offered loans at the actual advertised rate will be as low down as 15%, experts have warned. The changes, part of a continent-wide Consumer Credit Directive, are likely to affect borrowers as increasing amounts of banks have started to adopt risk-based pricing, meaning that the rates that customers are charged reflect their credit history.
Speaking on revelation of the news, Tim Moss, who represents moneysupermarket.com, a comparison service, told that under current rules, out of every 100 people that apply for loans in Britain, just 30 are accepted as only 20 of those actually receive the rates that were advertised. As of the 1st of February however, this is set to fall to only 15 people. For all those thinking about getting a loan in 2011, Moss advised that credit card files are studied properly before any applications are made.