Loan Rates

1. Loan rates are determined by your credit history.

Interest rates are determined by the lenders evaluation of how likely the applicant will be able to repay the funds based on their past credit history of repayment. Lenders then decide how much the borrower will pay for financing based on their credit history. High loan interest rates mean the borrower will be paying much more to finance their loan.

2. Obtaining your credit report hurts your chances of better loan rates.

Interest rates are usually higher if the applicant has bad credit scores. Knowing a credit score can give the potential borrower the confidence to negotiate lower interest rates. Getting a credit report gives the borrower the opportunity to correct any misinformation and possibly get better interest rates. The credit report can be obtained; free of charge, by the borrower by requesting copies through one or all three of the major credit bureaus. These three are: Equifax, Experian, and Trans Union.

3. Lenders use a credit scoring system to determine loan rates.

Interest rates are determined by a certain mathematical formula. This formula produces a single number that indicates a borrower's credit worthiness. Lenders use this scoring model developed by the Fair Isaacs Company, a leader in developing scoring models for interest rates.

4. It is important to know the annual percentage rate (APR) when determining loan rates.

Interest rates can vary from company to company. It is wise to take the APR into account when determining an interest rate. The APR takes not only interest into account, but broker fees, points, and other credit charges that the borrower may be required to pay.

5. Knowing your loan rate is wise management.

Proverbs 27:23-24 - Be thou diligent to know the state of thy flocks, and look well to thy herds. For riches are not for ever: and doth the crown endure to every generation?


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