Shopping the best deal on loan interest rates? Here are some tips & hints on what to look for first.
Factors that influence your interest rates
If you’re looking for low interest rate loans, there are some factors that may influence what interest rate you end up with for your loan.
Secured Loan
A secured loan is where the asset (car, boat, trailer, motorbike, caravan or equipment) is secured against the amount you’re borrowing. This means in the event of the borrower defaulting on repayments, the asset can be sold off by the lender to recover the outstanding loan amount. Generally you will pay a lower interest rate for a Secured Loan than for an unsecured (personal) loan.
If you’re buying a used asset, make sure you check with your lender on whether they accept older model goods, otherwise you may pay a higher interest rate.
Loan term
Check interest rates vs loan terms. Some lenders will offer lower interest rates for a longer loan term. Compare lenders interest rates based on the total loan term as it will give you a good understanding on what you will be paying back. The disadvantage of taking a longer loan term, just to get a lower interest rate could end up costing you more, whereas a slightly higher interest rate, repaid over a shorter term could mean significant savings.
If you’re borrowing a large amount, then most people will opt for a 5 to 7 year loan. Check with your lender to see if they will accept additional repayments without charging penalty fees. Making additional repayments can help to reduce the total interest payable and reduce the overall loan term.
Credit score
With recent changes in credit reporting, your credit score can influence your interest rate.
A credit score could be seen similar to an insurance rating. If you have had a spotless and long driving history, you’ll pay a lower insurance premium. If you’ve had multiple claims or drink driving, then you will pay an increased insurance premium due to the risk.
Finance is similar. Banks assess the risk or likelihood for a loan to default or, so if you’ve had bad credit in the past or multiple credit enquiries, then banks may charge you a higher interest rate. Likewise if you have had a spotless credit history, stability in your job or residence then you may be able to achieve a much lower interest rate.
Unsecured Loan
An unsecured loan is essentially a personal loan. The money can be used for any worthwhile purpose such as a car, boat, trailer, motorbike, caravan, equipment or debt consolidation. As there is no security taken against the goods, there can be a higher risk to the bank as they cannot recover the funds quickly should the borrower default. Generally you will pay a higher interest rate for an Unsecured Loan than for an Secured Loan.
Things to consider when shopping for Loan Interest Rates:
Don’t make too many loan applications. Most lenders won’t know your comparing them with other lenders, so when you submit an online enquiry, they may check your credit report as part of their loan application process which will show up as an enquiry.
Too many enquiries on your credit file will reduce your credit score which can have an impact on what interest rate you will receive.
Current Credit
Pay credit cards and loans before or on time. With positive credit reporting introduced to Australia. Being late on repayments can show on your credit file.
Not sure on what loan will suit your needs. Talk to the team at iCREDIT today for an obligation free quote or Apply Online
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