At first glance the personal loans market may seem simple enough, but get into the nitty gritty and it can be anything but. For example, have you ever applied for a loan, thinking you're going to get the deal you saw advertised, only to be offered a far higher rate? It's this kind of thing that can lead many people to despair, and some are calling for action to make the market clearer and fairer for all.
Research by Saga Money suggests that the loan market in the UK today "is not fit for purpose", with the practice of offering teaser rates to tempt people into applying for a loan, only to then be hit with a much higher rate on application, considered unfair to consumers.
Indeed, it points out that the average of the top-10 lowest advertised rates on the market stands at 3.23% APR, suggesting that such loans are widely available – Moneyfacts' own data shows that the lowest personal loan rate on the market is currently 2.8% APR, offered by Sainsbury's Bank – yet applicants have told Saga that they're more likely to be offered an average APR of 8.06%.
It seems that the over-50s could be particularly locked out of the competitive loans market, despite strong demand for personal borrowing among this age group. The survey found that one in five over-50s surveyed have applied for a loan in the last three years, a figure which rises to 30% among those solely in their 50s. However, this age group doesn't appear to be served well by lenders, many of whom "are not in tune with the changing needs of today's over-50s", said the report.
Providers were found to often apply inflexible acceptance criteria, particularly in terms of income requirements, which means those who could comfortably afford to pay off a loan weren't offered one: not having a payslip, for example, could automatically disadvantage many borrowers, despite the fact that they may have plenty of income from other sources.
"People are continuing to earn a healthy income later in life through a combination of wages, pension and investment income," said Saga, "yet many providers apply an arbitrary age limit on to whom they are willing to lend money."
Nici Audhlam-Gardiner, managing director of Saga Money, added that there was a clear need for borrowing in later life, "whetherthat is for home improvements or to pay for children's education", and that being turned down because of their age, or being offered rate much higher than they applied for, was "frustrating" for older borrowers.
"These are often people with a pension or investment income or part time earnings who are able to cope well with loan repayments, but find themselves shut out of the market, because only their pay slip is being taken in to account," she said. "It is time the market changed with evolving lifestyles."
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