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ROB STOCK/Stuff
Excellent credit scores surely deserve excellently low loan rates, but do they get them?
OPINION: I decided to do a truth check on Gem by Latitude’s claim to offer unsecured personal loans “from 8.99%”.
I was stunned by what happened.
Gem claims to offer unsecured loans with personalised interest rates based on people’s financial and personal circumstances, including their credit score.
Okay, I thought. I’m a married man, who has worked for Stuff for nigh on two decades. I’ve got a credit score of 984 out of 1000 on my Centrix credit report. I own a home in which I’ve lived for years. I have no debt.
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Surely, if I applied for a $15,000 loan to fund a holiday, I’d be offered the 8.99% rate.
The rate I was actually offered was 20.99%.
I must admit, I was only partly surprised. Earlier in the day of my application, I mentioned my plan to a financial mentor who helps people make their way out of crushing debt.
Christians Against Poverty calls on the Government to force ‘buy now, pay later’ lenders to be responsible, and do credit and affordability checks before lending.
She’d checked the rate Gem would offer her. She had a similar credit score to mine. She also had not qualified for a sub-20% interest rate.
So why were we offered such appallingly high rates? Could anybody actually qualify for 8.99%?
It was, apparently, all a horrible mistake. I should have been quoted 8.99%. Gem talked in euphemisms.
There was an “error” in information supplied by Equifax, which like Centrix, compiles credit reports on each of us ordinary human beings.
Lenders use credit reports to decide whether to lend to people, and, so we were told, to allow them to offer personalised loan rates.
The credit report financial surveillance system operates largely invisibly to the public.
It’s a huge concern, if consumers are being overcharged for loans due to errors in that system.
Equifax told me its credit file on me was correctly sent to Latitude, but it also sent a summary of what it contained information to Latitude, and this “did not completely replicate the detail provided on the credit report”.
It’s investigating. I’ve made Privacy Act requests of Gem and Equifax. I am retaining an open mind, for now.
For “commercial” reasons, Gem won’t tell me how many people qualify for the 8.99% rate. It says “many” do.
I checked again a week after the initial offer, and my complaint to Gem, and my 20.99% quote had not changed. The error persisted.
Perhaps many other people are being quoted unreasonably high rates, but assume the rates are fair.
But, it’s not hard to find a lack of “fair” in loan rates.
People getting loans from many car dealerships are offered loans on which the dealer gets to choose the interest rate. This takes advantage of the ill-educated, and unwary.
A fund manager friend just negotiated 0.5% off his home loan. Actually, it was 0.75%, but part of it was an accident of timing, so I’m just counting the 0.5%.
The financially assertive and savvy have long negotiated lower home loan rates than trusting souls get.
Clearly, anyone relying on debt needs to have their wits about them, and to be suspicious.
The rate you are offered may be far from fair.
GOLDEN RULES:
- Avoid consumer debt, whenever humanly possible
- Be suspicious of the rate lenders offer you
- Check your credit report for errors
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