You and your Interest Rate

It is very difficult to quote a rate for you and a specific product on this website, not because we are being evasive but because every rate is specific to you, your business, your trading history, your credit history, type of security and loan to value.

Borrowing money is all about risk to the lender. Here is some idea of what lenders look at when they work out your rate.

1) Your ability to repay the loan - this means your cash flow. Can you prove your income. There are many lenders who will lend even when you can't prove your income or have no accounts, however the rate is usually higher than those that can show accounts or supply proof of income.

2) History - your track record or past willingness to repay previous debt. If you have missed payments, defaults or County Court Judgments you will pay a higher rate than those whose track record shows a good payment history.

3) Security - known as collateral. The better the security, the better the rate. A lender will look at if they have to reposes the security for non payment, how easy will it be to market and sell on to recoup their funds. For example, a property that is in a good area and in high demand is easier to sell than an unusual property that will only attract a limited type of buyer. In these circumstances the lender will assess their risk and may increase the interest rate or decrease the amount they will lend on the property.

4) Loan to value (LTV) - this is how much a lender will lend compared to the value of the security. Usually the higher the LTV, the higher the rate. For example a lender may lend £85,000 on a property worth £100,000 (85% LTV) at a higher rate than if the lending facility was only 50% LTV or £50,000. As the LTV rises and the lender takes on more risk so does the interest rate rise as well.