What you see isn’t always what you get. Not in the loans market, anyway.
The need for transparency has never been greater as we adjust to the new normal.
However, for most borrowers, the rate advertised by banks and lenders isn’t the rate that borrowers are eventually offered.
We explain this in more detail.
The truth about advertised APRs
Advertised loan interest rates (i.e. the APR) are normally quoted as representative APR. This is a requirement from the Financial Conduct Authority (FCA) to ensure that at least 51% of successful loan applicants get the representative rate.
But this doesn’t mean that 51% of borrowers who apply for the advertised loan will get this loan rate. Recent research by Zopa confirmed that even people with a good credit score only have a one-in-three chance of getting the advertised rate when applying for a loan.
Here’s an example of how representative loan APR works in practice:
If 100 people apply for an advertised loan 49 of them will be rejected for a variety of factors which, when taken together, create an acceptable credit score to that loan provider leaving 51 applicants.
With the remaining applicants successfully approved from the original 100, banks and lenders only have to offer 26 (i.e. 51%) of these people the original advertised rate.
Loan calculators are also a source of confusion. They promote rates that are intended to be used as an indicator of interest rates and monthly repayments. They are only an illustration - the actual loan rate depends on a member’s individual circumstances at the time of the application. Calculators should therefore be used with care.
No more smoke and mirrors
Just fast, flexible and fair loans that are exactly what they say on the tin. That’s what GMBCU members get.
We always promote wise borrowing and complete transparency during the member loan process.
But how exactly do we ensure our members are fully informed of all the factors involved in borrowing?
1. The GMBCU Loan Policy
Our member loan policy is set by the GMBCU Board. Who sits on the Board? GMB members (aka people just like you) because we’re a Credit Union entirely owned by our members.
Plus, we’re non-profit, focused exclusively on improving the financial wellbeing of our members. We only provide affordable loans which save members money through highly competitive interest rates.
Speaking of which, our rates are reviewed on a quarterly basis. We compare them against the marketplace to ensure that we’re always fair and affordable.
2. GMB members see what we see
We encourage all GMB members to know the score financially by gaining free, unlimited access to our CreditView service.
Members gain unlimited access to the data that’s used to determine their individual credit score and the same data we use to assess loans. Why is this important?
A credit score indicates risk. It’s what financial organisations use to make decisions on applications for services. It has a major impact on whether you'll be successful when applying for a loan, credit card or even a mortgage.
In other words, it’s need-to-know information. Our members can access all the data that makes up their credit score using our CreditView service.
3. GMBCU treats members as individuals
Many advertised loan rates are representative of the ideal customer with a perfect credit rating. This is unrealistic. A borrower’s individual circumstances are influenced by many factors including:
- their credit rating
- their account history with the institution
- the internal lending policy of the institution
- the size and term of the loan
This all impacts the loan rate offered.
We don’t treat members like a number. Individual circumstances are carefully considered when we determine if a loan is right for a member.
Our member loan system is paperless and fast. However, we always include time to provide members with the right information to help them make better financial decisions. We are looking to establish long term working relationships which are mutually beneficial so transparency in what we do is key.
4. Fairness and Flexibility
GMBCU loans have no hidden charges or fees. Plus, you can repay your loan at any time without incurring additional costs.
We also understand that your circumstances can change and have included the option of payment breaks on our larger loans.
Moreover, we have a price promise. In the rare event that a member gets a lower rate loan offer, we will match or beat the rate as applicable.
Rewarding loyalty is also very important to us. GMB Trade Union membership is a key factor which is included in our loan policy and reflected in both the transparency and competitive rates we offer.
We make every effort to present our member loan offerings as clearly as possible. For example, the Cash Flow, Family Credit and Save Secure loans have clearly stated interest rates and terms applicable to all members prior to application (you can view all of this information on our website).
For other member loans that are more individual in nature (usually larger and for longer repayment terms) we indicate a range of interest rates applicable to these loans prior to application.
We’re always there for our members
Are you a GMB member? If you have any burning questions about one of our member loans or how we assess individual loan applications, call us on 0161 486 1777 or email us at firstname.lastname@example.org.
We understand this is a big decision. You deserve to be 100% confident about your borrowing requirements.