Getting a good deal on your interest rate can make a big difference when you're financing something important. Unfortunately, there's no one-size-fits-all, and those fantastic interest rates you've seen advertised on billboards or in commercials are often the best-case scenario, usually meant for borrowers with ideal profiles and perfect conditions.
When lenders assess an individual credit application, the details of the customer's profile, the asset in question, and other specific factors come into play. This can lead to the final rate offer being different from the advertised rate.
Rate seems too good to be true? It may very well be.
It's necessary for borrowers to understand this potential discrepancy and realise that the advertised rate isn't a guaranteed offer for all. Engaging with a trusted finance broker or consultant can help set realistic expectations from the outset.
Our guide will explain the basics of how lenders decide on your interest rate based on your situation, the age and type of what you're buying, and whether you buy it from a dealer or someone else.
How Do Lenders Decide What Rate to Offer You?
To put it simply, if a lender thinks lending money to you is not too risky, then you're more likely to get a lower interest rate. This usually means lenders will see you as a safer bet if you have a good credit history (more likely to pay back their money), or buying something brand new that is more likely to hold it's value (in case they need to repossess it for any reason).
Most lenders use Rate Loadings.
Think of rate loadings as the way lenders and banks decide how much interest to charge you. They look at how risky it might be to lend you money, and will load up your rate based on each aspect they consider more risky.
Knowing about this can help you snag a sweeter deal.
What Affects Your Interest Rate?
Your Credit Profile: Your past history with money, how steady your income is, and your other assets and liabilities matter a lot to lenders. Banks feel more comfortable with people who have a good and responsible track record, which can lead to better rates.
How New Your Purchase Is: Buying something brand new? Banks like that because it's less risky for them. But don't worry, buying older stuff doesn't always mean higher rates. It's about finding the right lender for you.
Where You Buy: Buying from a dealership might get you a better rate because dealerships typically hold certain accreditations and licences, which means lenders can trust them more than your average Joe over on Facebook Marketplace.
What You're Buying and How You'll Use It: The thing you're buying, and how you plan to use it, can affect your rate too. Some assets used for business might actually have higher rates because they might get used a whole lot more each day.
How to Land the Best Rates
Boost Your Credit Score: Show banks you're good at paying back by keeping your credit score healthy. Check your credit report and keep your repayments on time.
Choose Wisely: Pick something that keeps its value and suits your budget. It's all about balance.
Talk It Out: Ready to chat about your loan terms? Some things might be more flexible than you think, and the chosen loan terms could affect your final interest rate.
Ask the Pros: That's where we come in! Blade Finance can help you through the process and find the best deal for you.
What Does this All Mean?
Getting the best interest rate isn't just about luck; it's about being smart and prepared. By understanding how banks decide on rates and what you can do about it, you're setting yourself up for a better deal.
And remember, even a small difference in your rate can save you a lot over time.
We at Blade Finance are here to help you get through the finance maze with clear advice and support. Whether you're financing a car, equipment, or anything else, we've got your back, making sure you feel confident and in control.
Need some help with your asset finance? Choosing Blade Finance ensures a seamless journey through the application maze. Not only do we decipher the complexities and connect you with the best lenders, but we take the time to understand you and your business. Let us assist you by streamlining the application process.
Give us a call today on 1300 533 917, or email gday@bladefinance.com.au
Disclaimer: The information provided in this article is intended for general informational purposes only. Every financial profile is unique, and not all advice may be suitable for all situations. It's essential to consult with a professional or trusted advisor to ensure that any decisions made are right for your specific circumstances. Always do your due diligence and make informed decisions.
