mention two factors which influence interest
Answers
Answer:
1.Credit Score. The higher your credit score, the lower the rate.
2.Credit History.
Answer:
Credit Score
The higher your credit score, the lower the rate.
Credit History
The less credit history you have, the less knowledge a lender has of your repayment ability, possibly making you slightly more risky. The better the payment history, the better the rate.
Employment Type and Income
Self-employed, hourly employed, bonus-based pay – these all affect the risk factors of whether you’ll be able to pay back the loan.
Loan Size
How much money are you asking for? Often if you are requesting an amount under a certain level (i.e.$100,000), there may be a slight increase in rate.
Loan-to-Value (LTV)
What percentage is your loan amount to the value of the property? Typically, the lower the percent, the lower the rate.
Loan Type
Fixed, variable, adjustable, balloon – these all have varying rates because of the variation of risks. Depending on the situation, your initial interest rate may be lower with an adjustable rate than with a fixed rate but you run the risk of the rate increasing significantly later on.
Length of Term
The shorter the term on your loan, the quicker you’ll be paying down the debt; possibly resulting in a better rate. It’s important to note that your payments will most likely be higher, so you’ll want to make sure you can afford it.
Payment Frequency
Because of the agriculture industry’s unique nature, if you elect for a payment plan that allows for an annual or semiannual payment rather than a monthly one, you can expect a higher rate.
Property Type
A residential house will have a lower interest rate than a commercial farm on 50 acres because of the increased risk that comes with a farm loan. Purchasing a farm or land is different because there aren’t as many properties for value comparison, buyers or people that can afford to.
Co-borrowers
Will there be other people on the loan, and if so, what does their credit look like? All parties involved in the loan will be used in determining the rate.
Debt Ratio
How much money is made monthly versus the cost of monthly bills. The typical ratio that lenders looks at is 42%.
Documentation Available
Are you able to produce all documentation (bank statements, taxes, retirement accounts, etc.) to show your assets? This will help ease the risk factors for a lender and help lower the rate.