Just been offered a horrible loan rate from Santander and I don't understand why.

[EmmbadTheBad]

I want to borrow £10,000 over two years for home improvements. I was attracted to Santander's low rate for 123 account holders - I think it is around 4.5%. I didn't have a 123 account but had been looking at one anyway for the cashback so I initiated the switch process from my current bank and rang Santander to put in the loan application.

I was asked the usual questions - earnings (good), outgoings (almost nil), other debts (none), am I comfortable with the monthly repayments (yes) and agreed to the credit check. At which point I was approved for the loan with an interest rate of 8.99%!

Wha?!!

Now I understand that their advertised rate is representative and they only have to give it to 51% of applicants but I'm at a loss to understand why I've been offered such a horrible rate. The lady said that it was based on credit rating but she did not have access to my credit report so couldn't tell me what was causing the high rate.

I've since checked my credit rating on Noddle and it's good - 4/5. I feel a bit cheated because I suspect I could have got a better rate from my current bank (Natwest) who I'm leaving to go to Santander.

Does anyone have any experience of this? Have you challenged a bad loan rate offer?

And can anyone lend me £10,000?

Hang on, I'll check down the back of my sofa ...

Could it be something to do with loyalty to the bank? Maybe it's because you switched to them? That's the only thing I can think it was looking at what you have said. I'm assuming obviously it wasn't an offer for switching to them in the first place!

Try Sainsbury's. I think they're offering about 4% for loans of a similar amount

Becca - it did occur to me that it might be because I am a new customer but the APR they offered me was worse than if I wasn't a customer!

I'm now wary of applying elsewhere as apparently (something else I don't understand) this could have a negative impact on my credit rating. Is there any other financial product where you get penalised for shopping around?!

I've got a quote from Nationwide's 'soft search' application for 6.2% which I might go for. The quote is based on my credit score (so I'm reasonably confident of getting a same or similar rate if I go through with the loan application) but it doesn't leave a footprint on your credit record.

Hey Emma, you say it's for home improvements, have you recently moved? That can affect your credit rating especially if the previous occupants ran up debt at the address.

I would go to natwest and see if they can offer you a better deal if it was me, or ask if you opened a 1-2-3 account whether they could do you a better deal? X

That can affect your credit rating especially if the previous occupants ran up debt at the address.

That's not true.

Not being resident at an address for long will affect your credit rating, particularly if you are not on the electoral register, but, unless you have financial links with them, other either past or present residents at the address do not affect your credit rating,

That's good to know, Maybe things have changed? When I bought my first house (years ago!!!) I tried to set up a monthly direct debit for gas and electricity and they said I couldn't as the address had bad debt from the last owners and the only way they could supply me was through a very expensive pre-paid metre, I had to change suppliers but it got sorted.

That's a bit of a different situation bella, in that instance the utility company were just limiting their losses but the fact you got it sorted with another company is evidence it didn't affect your credit rating.

I guess so, it was a bit worrying at the time tho.

We got the 4.5% with Santander but:-

We have our mortgage with them and at the time of applying had done for about 15 months.

We have a 123 account which was opened when we got the mortgage which is purely used for paying bills to get cash back and 1% back on our mortgage payments which is perfectly managed and never overdrawn.

Ours was a joint application

Perfect credit score

We did have another loan elsewhere when we applied which we consolidated.

I think HSBC are doing a 3.9% deal at the moment.

Santander wanted 6.99% had we gone down the route of additionally borrowing on our mortgage.

I hope you have better luck elsewhere.

It might be a con - advert rate only offered to very few or 51%.
Would you be able intead just to do the improvements gradually whilst saving up to pay in cash for them? Could you put them off until you could afford them?

First direct are offering 4% ATM