Insane Personal Loan Interest Rate

[delistuff]

Please explain to me like I’m 5, why FNB is only willing to offer me a personal loan of R60000 at an interest rate of 28.5% over 6 years? My credit score is 670 and I make R25000 gross a month.

I was rejected for a student loan and approved for a personal loan at 28.5% interest. I ask for a lower rate… consultant says the issue is I’m not a private client so they can’t lower my interest rate. I ask if they can change it to a 2 year period and he says no. I’m so confused???

I’ve reached out to Standard Bank.

Update: Standard Bank offered a 2.5 year loan at 15.75% interest and I accepted. I’m amped.

 

[pyonghwabear]

@delistuff Explanation:

A bank wants to make money. how they make money, is accepting people who have less than a 10% chance of defaulting (from their model/ credit scorecard), and charge them (100%/[100-10]%=) ~11% minimum.

They accept people who have less than a 20% chance of defaulting and charge them ~25% minimum.

Etc. this would, if they could, go down to people who would have less than a 50% chance of defaulting and charge them more than 100% interest.

Basically they accept anyone who they can make money from and charge them more than they are expected to default for.

You got classed as a higher risk, unfortunately.

Unsecured debt

Such a high loan for education is bullshit. You absolutely should not go into unsecured level interest rates... For student debt.

also, yes, seems strange that you have a high credit score but are in a high risk group. BUT worth knowing that bank classification Vs Experian and other credit bureau classifications are different risk scorecards

Screw that loan offer. Go get alternative quotes.

Other banks have different models. Absolutely compare and contrast them.

 

[delistuff]

@pyonghwabear Understood.

 

[delistuff]

@pyonghwabear Just an update: Standard Bank offered a 2.5 year loan period at 15.75% interest and I accepted. I’m really happy as I need this degree for my career advancement. I plan on paying extra into the account, so I can get it done in 1.5 years.

 

[pyonghwabear]

@delistuff That's a super super dope update!!! Thanks for sharing, and well done for finding a worthwhile opportunity elsewhere!

Good luck on your studies, really wise investment

 

[4hisglorynotmine]

@pyonghwabear Compare and contrast *
But good advice.

 

[ejd]

@pyonghwabear I also have a high credit score, but during covid had a hard time paying bills on time, which negatively affects my ability to get a loan at good interest rate. Might be some thing along those lines.

 

[resjudicata]

@delistuff Personal loans have high interest unfortunately, when I had one my interest was 17% which I thought was high so I paid it off in 6 months to avoid paying all that interest. My FnB credit card is at 12.5% .

So I suggest you get a credit card instead.

And remember the more enquiries you make the more your credit score plummets.

 

[delistuff]

@resjudicata I’ll think about the credit card. I like that it’s pre-approved so at least that won’t be another hard enquiry.

 

[resjudicata]

@delistuff If it is pre-approved then perfect. I hope you come out right.

 

[wint]

@resjudicata Pre-Approval does not necessarily mean no credit check. That pre-approval is based on soft credit checks, like the ones clearscore or experian does. It has your credit records and based on that you have a credit score. That's why you don't see an enquiry every month.

Once you accept a pre-approved credit card, they do a hard enquiry on you. To assess and confirm. I learned the hard way

 

[heathershaver]

@resjudicata How is your FNB credit card at 12% that's crazy good

 

[ejd]

@heathershaver It has to do with the amount you can borrow and the amount you can afford to pay back. I am a Private Client with FNB and also get a good interest rate, I could also go up to Private Wealth, butI have done the math and what you lose on Ebucks is not worth going past Premier. They want you to either have all your eggs in one basket or they willing to give you loans left right and center (at the so called preferred rate) which means you actually have more debt than a person with a higher interest rate. The more money you make the easier it is to end in debt.

 

[resjudicata]

@heathershaver I pay it off every month, and then everytime I get a pre-approval for limit increase notification on the app I apply for it, so basically everytime I increase my limit they bring down my interest rate by 0.5% or 1% sometimes. I increase the limit twice a year.

I started at 22.5% with a R6000 limit and now I am at 12.5% with a R55 000 limit.

 

[dfomin]

@resjudicata I'm actually pissed with them. I applied for a decrease in my interest rate and also then wanted to increase my limit and the consultant told me to increase it first I'll get a better rate. Limit is R100k but interest is at 21.75%. Now I can only apply for lower interest in 6 months SMH. Wish I knew this sooner lol. Luckily paid off but still if push comes to shove a better interest would've been better.

 

[resjudicata]

@dfomin Yeah 21% for a R100k limit is not good, they should make it lower that way it entices you to spend more. But hey these banks can be greedy.

I am not sure how limit increases work when speaking with consultants, they usually always lie either way, so I prefer just doing everything on the app where I can read the contract clearly and unrushed, and the app will show you exactly what your interest rate will be when you increase your limit. So it is easy to either accept or decline.

Consultants lie just to make their sale and reach targets.

 

[guns4activists]

@dfomin Sex and race makes a huge difference when you bank with FNB unfortunately.

This is not the same at every bank in SA. A male and female of the same age and race with the same qualifications earning the same salary(although unlikely) will not have the same interest rates unfortunately. The female will always get a lower interest rate.

Men are seen as a higher risk overall. The same applies to insurance.

Nedbank actually offers the best interest rates on credit.

 

[joyousjen]

@resjudicata My FNB credit card is at 20%, and I’m a Private Wealth client. FNb says that’s the best rate they can give me?

 

[resjudicata]

@joyousjen FNB is messing around with you. I am at 12.5% on premier, I could get it lower if I upgraded to private.

 

[carlv_52]

@delistuff Their book needs balancing in the other direction than what taking you on would cause. You are too much risk for unsecured debt for them currently so they are giving you an offer that most likely sends you packing, and if you are dumb enough to take it they get compensated for now needing to fix an even bigger book balancing issue.