Lending Criteria for an Affordable Loan Rate: How to Get Approval for a Low Interest Rate Loan

Whilst everyone wants an affordable loan rate, not all will be eligible. This is because lenders use credit scoring to weed out applicants who are most likely to default on their credit agreement. Since the credit crisis, the banks have become increasingly concerned with protecting their balance sheets from bad debt. Whilst this position may or may not change in the future, it certainly won’t until unemployment starts to fall to a more realistic level.

Acceptance for An Affordable Loan Rate

A low interest rate loan will only be offered to customers with excellent credit, stable employment and a low income to debt ratio. Customers who do receive approval for payday loans will be further broken down into interest rate tiers to provide a more effective reflection of the risk of default. There is no longer a ‘one size fits all’ approach to lending so reliable payers will always enjoy the lowest interest rate loans.

Searching for a Cheap Bank Loan

It is important to perform plenty of research before applying for a low interest rate loan. There are a number of price comparison websites, such as moneysupermarket.com, that can be used to trawl the market for the best deal. It is then possible to compare the key features and decide which low cost loan to apply for. A common mistake many customers make is applying for too many low APR loans, mortgages and credit cards in a short timeframe. Each credit search will be recorded for a period of 12 months.

 

Criteria for a Low Interest Rate Loan

  • Excellent credit. Creditors will only approve individuals who have a reliable repayment history. A customer with missed and late payments will be deemed too great a risk for an unsecured affordable loan. Subject to affordability and sufficient home equity, secured homeowner loans may be available at a higher rate of interest. A bad credit rating not only increases the cost of borrowing, but also the likelihood of creditor rejection.
  • Stable employment. The longer the applicant for a low APR loan has been in the same job, the greater the chance of acceptance. Anyone who is still in their probationary period or in temporary employment will be rejected for a low interest rate loan.
  • Low income to debt ratio. Creditors are looking for customers who don’t have a high amount of debt relative to their income. Whilst an income to debt ratio of under 36% is considered essential, it will need to be lower if the customer is to qualify for an affordable loan rate.

Getting the Cheapest Loan Rate

Whilst low interest rate loans will be available to individuals who can comply with the above criteria, this group is relatively few in number. It may be possible to get a cheap bank loan that is secured on a property at a better rate than would be available on an unsecured basis. Always be selective and perform plenty of research before applying for a low cost loan. Too many applications for loans and credit cards will reduce the likelihood of acceptance.