What Factors Affect A Lender’s Decision And Interest Rate?

November 6th, 2018 by

Most certainly the question I am asked most frequently is “What is my interest rate?” To answer that question, I believe it is important to understand that an interest rate can be defined as a price for risk.

When the lender is assessing a credit application, they are assessing the risk associated with the application for credit. Attached to the credit decision is an interest rate that reflects the lenders risk assessment. High risk will mean that the applicant will pay a high-interest rate. Conversely, an application deemed low risk will be reflected by a low-interest rate.

That risk is assessed by an applicant’s CAPACITY (which we have discussed previously as someone’s ability to pay), CREDIT history (how has the applicant repaid his/her obligations, are there any positive or negative trends to consider etc.), COLLATERAL (the vehicle) and CHARACTER (lenders generally wish to see stability as it relates to an applicant’s residence and employment).

While COLLATERAL will not have an affect with respect to the credit approval, the lenders do have established guidelines with respect to vehicle age, kilometers and value that the dealership will have to adhere to.

The strength of each of these factors all are determinants for lenders when assessing a credit application and determining the interest rate.

If you have any further questions you can visit us in person at any of our Crown Auto Dealerships, call us at 1-877-346-8082 or visit us online at www.crowncredit.ca and click the FREE CREDIT EVALUATION link.

Posted in Financing