Moneyfacts: Lenders weigh up risks

18 May 2006
According to online financial adviser Moneyfacts, more lenders are using individual risk assessments to determine what rate of interest people should get for borrowing money.

This means that people with blemishes on their credit records should not expect to receive the "typical APRs" advertised by lenders as banks and loan companies lean towards applying rates on a case by case basis, scrutinising credit histories.

"Lenders are offering low rates to everyone who walks in off the high street," claims Moneyfacts' Lisa Taylor, "but the rate you see advertised can differ from the ones you actually get."

Ms Taylor suggested that lenders were now more prepared to alter their rates to reflect the person borrowing money, if they represent a high risk.

"They are relying on risk-based pricing far more," she continued. "The lender may load the rate to reflect any credit history [and] people with impaired credit history often won't expect to get the advertised APR."

When companies advertise APR as "typical", they must, by law, offer that rate to at least two-thirds of their customers. As a result, in cases where a higher rate loan can be justified, lenders will aim to recoup any lost revenue from offering a market-leading typical rate.

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