Did you know there are more things that influence the interest rate on your Kitchener car loan than just the prevailing rate and profit margin for the lender? While modest in their effect, there are 5 other things that can influence that rate.
We all know about credit score, prevailing lending rate and what the various lenders charge in interest. But did you know any of the following can influence the interest rate charged on a Kitchener car loan?
The Age of the Vehicle
If you’re looking at a secured car loan, the age of the vehicle can influence the rate you’ll be offered.
New cars depreciate quickly, so the lender factors that into the rate they charge. Older cars have a higher chance of requiring repair or suffering mechanical failure.
As the lender would repossess the car if you default, they need to know they would get most, or all, of their money back. If a new car depreciates and a used car has a higher risk of requiring work before being sold, the lender increases the rate to compensate.
Believe it or not, what you do for a living can impact your interest rate. Some jobs have lower job security while others have higher risk. Even if your industry is an increased of industrial action, your interest rate can be higher.
Anything a lender considers as impacting your ability to repay the loan will be reflected in risk. The higher the risk, the higher the rate.
Your employment history also factors in to how much of a risk you are seen to be. A sporadic work history or long periods of unemployment can increase the risk. Even if you have retrained into a new profession, until you have had a couple of years of steady work with no long breaks, you will still be regarded as a risk.
This is particularly challenging for seasonal workers or the self employed. There are ways around that though.
Your Debt to Income Ratio
While technically this forms part of your credit score, lenders pay particular attention to debt to income ratio. The more debt you have, the more likely you are to default. That increases the risk of lending to you and therefore, can result in a higher interest rate on your Kitchener car loan.
The opposite can also be true. If you have never had debt and have a clean credit slate, lenders will treat you as an unknown quantity. Even if you have always paid on time, if there is little or no record of that, a lender isn’t going to take you on your word.
Again, higher perceived risk, higher interest rate.
Finally, your relationship status also has a bearing on how much interest you’ll pay on a Kitchener car loan. Single people are regarded as less settled and therefore, a higher risk to lend to than married or cohabiting couples. Even if you’re not married, if you have been with someone for a significant period of time, you could get a better rate!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!