If you’re ready to finance a new car, truck, construction equipment or something else and you’ve been shopping around at a few different banks and lenders, chances are you’ve discovered that the rate of interest on offer can wildly vary depending on who you’re talking to.
Additionally, there may be one lender that will approve your finance request while others won’t even give you the time of day.
So, what’s the score? Why is it that approvals and interest rates are seemingly all over the place? Here’s why some lenders will give your finance application the thumbs up while others may not, plus a list of factors that lenders look at to determine your personalised interest rate.
Why some lenders approve while others don’t
Being turned down for funding can be extremely demoralising. However, if you’ve submitted a couple of applications to various lenders and one approves while the other denies, you might be wondering why.
Essentially, it all comes down to the lenders and their specific loan approval standards. Each will be different – some somewhat, others significantly – which means that certain variables are scrutinised more severely by some lenders, while others are more lenient.
Top factors that affect your interest rates
You’re probably familiar with the term “credit score,” but do you know how it’s calculated? Simply put, you have a ‘credit report’ somewhere out there that includes information like how many credit applications you’ve made (e.g. post-paid phone contracts, credit cards, loans, etc. ), the total amount of money you’ve borrowed, and whether you complete all of your payments on time.
The score is calculated using all the above data from your credit report and ranges from 0 to 1,200 (Equifax), the better your score, the cheaper your interest rate. You can check your credit score for free at a few different websites, including www.getcreditscore.com.au.
If you uncover something that shouldn’t be there, you can contact the credit reporting agency to get it corrected.
As you may expect, getting approval if you’ve been unemployed for a decade and have no income can be difficult. This would put you at a very high risk for lenders, resulting in either an extremely high interest rate or a complete rejection.
The rate of interest is affected by factors such as the type of job (full-time, part-time, casual), the number of hours worked each week, and more.
Length (term) of loan
When your loan period is shorter, you’ll be able to pay it off faster, which will almost likely result in a reduced interest rate. However, keep in mind that if you choose a shorter term, your monthly payments will increase, so be sure it’s an amount you can afford to pay off on time.
Not going with a broker
Okay, we’ll admit that we’re a touch biased on this one. But consider this: if you’re looking for a washing machine, you’ll go online and check every store to find the best deal, right? Shopping for the best interest rate is similar, with one exception: it’s quite impossible to know every single lender and visit them to check their rates. Everyone’s circumstances are different.
Which is where we come in.
Want to have someone going into bat for you that knows the game like the back of their hand? We’re ready and raring to get out there and secure you low interest rates.
We’re here to discuss your needs and will work to tailor a financing solution that aligns with your requirements.
Speak with us to lock in low interest rates today.
Send us a message and you’ll hear back from us shortly.
Disclaimer: The information contained in this article is general in nature and does not consider your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.