Andrew Hagger, Head of News and Press at moneyfacts.co.uk, comments on the growing number of providers switching towards a risk based lending approach, and the need for independent regulation to confirm that 66% of consumers accepted for borrowing are receiving the advertised typical rate.
As if shopping around for a personal loan or credit card is not complicated enough with varying terms, conditions and rates, consumers should also be aware they may not receive the headline rate which may have initially attracted them.
Most recently we have seen two big household names adopt the risk based pricing approach, firstly, Sainsburys Bank moving their cards away from fixed pricing. And secondly Eggs personal loan pricing is no longer a one price fits all scenario.
With 80% of loan providers already adopting typical rates, the cards market seems a little way behind with only 35% of providers pricing this way. However, with the need to stem the tide of rising bad debts, but at the same time increase interest income, card providers may soon to move towards this type of pricing structure, which better reflects the risk involved.
Surprisingly, Cahoot is the...
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