It’s not every day that you’re financially stable, to the point where you have no worries about money. However, no matter how consistent your income is, emergency situations can inevitably strike at any time, especially when you least expect it. The chances are that you need to get your water heater repaired, pay for some medical needs, or finance your child’s education. This is where a personal loan comes into the picture, as your most viable financial solution.
A personal loan is an unsecured type of loan (meaning that there’s no collateral) offered by various banks, financial institutions, and lenders. The terms and conditions vary from one type to another and from one lender to another. However, one crucial facet is the interest rate, where your goal is to have a lower one.
Know that some factors affect the interest rate of your personal loan application. Below are four factors to keep in mind:
1. Income
When submitting your loan application, your lender will factor in your income. They’ll take a look at how much you’re earning every month and where you’re sourcing your money. This will help them decide whether or not you’re capable of paying off the loan, since it is an unsecured one. They also want to ensure that they provide you with the appropriate interest rate and the right loaned amount that you will be able to settle in the long run.
2. Employment
In line with your income, your lender will factor in your employment, whether you’re self-employed or an employee of a business. If you’re running a business, they want to ensure you are generating enough income on a regular basis, and the same is true if you’re working for a particular company or a government office. Of course, the more secure your job is, the lower your interest rate will be, meaning that this is a vital determining factor for loan approval.
3. Credit standing
Most lenders will access your credit report from the credit unions during the loan application process. They’ll take a look at your credit score and review your credit history, which will help them determine whether or not they’ll approve your application. Along with this is to identify the interest rate that they will most likely offer you. Ultimately, having a good credit standing will give you a higher chance of getting approved and having a favorable interest rate.
4. Relationship with the lender
Contrary to what you might think, your relationship with the lender will ultimately affect the decision for your interest rate as well. If you have been pursuing bank transactions with a certain lender with a good track record, they’ll likely approve your loan and offer a lower rate as a courtesy. This is because you already have a loyal relationship with them, which makes them confident that you’ll be able to pay them in time!
Conclusion
At this point, you now know the several factors that will affect your personal loan’s interest rate—income, employment, credit standing, and relationship with the lender. To that end, be sure to consider all these before submitting your loan application so that you know what to expect. Ultimately, getting a favorable interest rate will make a difference in your personal loan, helping you rise above your financial situation and allowing you to pay back your debt smoothly!
Are you looking for a personal loan with the best interest rate? We’ve got you covered, as we’re your go-to credit union in Buffalo, NY! As a financial institution, we provide local credit union banking services, credit card services, and loan applications. Get in touch with us today to see how we can help!