So is this just another type of risk-based pricing?
In recent years, a bunch of Aussie personal loan lenders have adopted risk-based pricing. It’s a tiered system of pricing whereby a lender offers an interest rate based on a customer’s credit rating.
However, offering a rate based on a borrowing term is a lot less common. In fact, according to the Mozo database only three lenders have this system in place: SocietyOne, Teachers Mutual Bank and Queensland Country Bank.
Mozo Banking Expert, Peter Marshall explains that this type of tiered system is just another version of risk-based pricing.
“In this instance, lenders are looking at customers opting to borrow for longer terms as higher-risk,” he said.
“This is possibly based on their own experience. These lenders may have found that people with longer loans are more likely to have problems over the life of the loan.”