Loan Rates - page 2

Rates offered normally follow credit checks

The potential lender will then check that persons credit record before deciding on a rate; this action places an indication of the enquiry on the credit record. The indication is known as a footprint (others have been here before you!), and it will tell an enquirer that you have made other applications for credit which have warranted a check on your status. The effect of this is not likely to be to your benefit.

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If a potential lender finds that your record is in pristine condition with not a footprint in sight, they will be inclined to judge that you are not normally a user of credit. This will suggest that your affairs are in good order, and that you present a very low risk of default on repayments. You should be offered a very competitive rate of interest.

If on the other hand your record looks like a children's playground after a snowfall, with footprints in profusion, then the lender is likely to assume that you have made many enquiries for credit and that you may even have loans with payment queries outstanding. Certainly your record will not be inclined to inspire confidence, and any interest rate offered will reflect this.

So footprints are a blot on your credit rating and are to be avoided as far as is possible. However, you have received a 'personalised' loan offer and enquired what rate you would be expected to pay. This seemingly innocent action has placed a footprint exactly where it could affect any future loan offers.

So if you are looking for a loan and receive a promise of a personal rate calculated to match your needs, whilst at the same time you see advertisements by the same lender offering a 'typical APR' and quoting a rate, which one should you go for? Only you can decide, but an APR will give you a guide to what you could expect and will not create a footprint; don't forget however that the word 'typical' means that you may get an offer which is either side of the advertised rate. If you choose to follow up the personal offer which means that you have to enquire what the rate will be, you will be given a figure which is the actual rate which will apply to you or very close to it, but it will cost you a footprint for each lender you approach with the same query.

Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required. Think carefully before securing other debts against your home.

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