What Effect Does Your Credit Report Have On Your Interest Rates?
Interest rates are what you pay to borrow money from a financial institution or lender.
Interest rates usually run at an Annual Percentage Rate (APR). Let's say you still owe R100 000 on your car loan, and you see that you're being charged 10% interest per year. If your interest rate is 10% per year, then the interest charged for one year will be 10% of your initial loan amount.
Factors that can have an effect on your interest rates
- The current inflation rate will play a significant role. While lending money during a high inflation period is more expensive, this higher percentage can lead to higher returns on investment.
- Another factor that will influence your interest rates as a borrower will be the quality of the product that you are taking out. It's important to take into consideration the status and experience of your loan provider, borrower and policyholder when discussing different types of loans or credit facilities.
- Your credit score and credit report can also have an influence on the interest rate you receive.
Look after your credit score
You have probably seen that you are paying higher interest for something compared to someone else, even though they seem to be the same product. The reason for this could be your credit score which is reflected through your credit report. It's important to know that your credit score can affect the interest rate you are charged. If people see you as high credit risk, you can expect it to translate into higher interest rates.
Your credit score
In both good and bad economic climates it is imperative to make an effort to save as much money as possible. In times of economic prosperity there are certain loans which often come with lower interest rates for those who have a better credit score history.