What You Should Know About Personalised Pricing On Loans

Who Benefits The Most From A Loan? The Richer Or Poorer?

Nationwide have recently released their new system for personalized loans. Now that the slander of banks ethics has somewhat calmed down, this system will actually be in favor of the rich and hit the most vulnerable the hardest…fair I ask?

Nationwide has decided that the interest rate passed on will reflect the credit history of the customer and not the value of the loan. So while debt charities and the Government are trying to get banks to be fairer, this doesn’t seem to have made an impact for this bank!

To put this into perspective, someone earning

Whereas before, someone earning £30,000 a year and someone earning £150,000 a year would pay the same headline rate on a personal loan, under the new system, a poorer customer who is more high risk than someone on a high salary would pay an interest rate of 19.9% on a £1,000-£3,000 loan. The more affluent borrower would pay an interest rate of 15.9%.

Nationwide has stood by their action, with its director of consumer finance, Jeremy Wood saying: “As a prudent lender in the current credit environment it is important that, in pricing personal loans, we are placing a greater emphasis on risk and lending appropriately.”

However, financial experts have responded, with Andrew Hagger from the website moneynet.com commenting: “The net effect is that the people who can least afford it end up paying more.”

While some argue that this new system makes sense in the current credit constricted climate and that the financially secure and dependable shouldn’t be penalized for the recklessness of others, you can’t help but think that with consumer debt already in its billions, pensioners facing crisis and repossession at an all time high, whether this is the fair and responsible lending behaviour the Government envisioned emerging from the downturn.