Does Credit Score Rating Affect Interest Rates on Loans?
Most people dream of owning their own home someday. Many people are able to achieve the dream of owning a home. For those who have less than perfect credit that dream can fade away quickly. Lenders want to see financial stability in their customers, and they want to know that customers pay their bills.
Does Credit Score Affect Interest Rates
Yes, credit score can definitely affect the interest rates on loans. In a perfect world, everyone would have great credit, but in reality, there are many people who struggle to maintain a good credit score. Lenders would love to have all of their customers have credit scores above 700, but many people do not have a credit score in that range.
Ways Credit Score Affect Interest Rates Loans
- Customers receive higher interest rates. A poor credit score can mean that consumers are stuck paying the maximum interest rate allowed by law. Paying interest rates in the 20% range can mean paying double or triple for a purchase. For example, if loan customers purchase a vehicle for $12,000, they may end up paying over $24,000 over the life of the loan. Poor credit can be very expensive for those who need to make big purchases.
- Customers may be denied credit. A very low credit score can cost consumers the loan that they wish to receive. Lenders may be flexible with giving loans to consumers with a credit score that is a little lower than their requirement, but if they bundle even lower credit and poor payment history, consumer have a slim chance of receiving a loan.
- Customers may need to make a joint purchase. Loan customers may need to get a joint account or co-signer to receive a loan. Consumers may be able to get a low interest rate with another applicant with a high credit score and good payment history. Loan customers can expect to receive a very high interest rate without a good credit score.
- Customers may have to put down a down payment. Some lenders may allow customers to receive a loan with a down payment. The interest rate will usually be high, but customers are still able to receive the loan to make their purchase. Without a good credit score, consumers do not have a great deal of bargaining power when it comes to interest rates.
Ways to Get Good Interest Rates
- Consumers should pay all bills on time.
- Consumers should not get more credit that they can pay back.
- Consumers should keep low balances on credit cards.
- Consumers should make extra payments on current bills.
- Consumers should find out what they requirements are for a particular interest rate before applying for a loan so that they make sure that they meet the requirements.
- Do not carry a large amount of credit card debt.
- Make sure that the credit score is 700 or above.
Consumers have a great deal of power when it comes to the interest rate that they receive on a loan. It is a good idea to conduct research on the requirements for loans before it becomes necessary to pay high interest rates on loans.