The interest rate of a consumer loan depends on many factors. And this is by no means a situation in the lending market and not types of consumer loans. Let’s try to divide the factors of pricing of consumer loans into 4 categories and consider each of them individually: Independent factors; passive factors; commercial factors; client factors.
Independent Factors for Calculating Loan Interest Rates
This category includes such factors as:
- The current refinancing rate.
- Current legislature.
- Antitrust management.
That is, all the factors that the bank is simply not able to control and change. These factors are in no way dependent on banks.
Passive Factors in Calculating Loan Interest Rates
These factors are similar to the previous ones, however, they depend not only on organizations, public services, the central bank, etc., but also on the situation in the country and in the world as a whole. This may include factors such as:
- The situation in the country.
- The position of the bank in the overall market structure.
- The income level of the population.
- Bank features.
Here, you should pay attention to inflation, which does not depend on the bank, but is always reflected in the current refinancing rate.
The income level of the population and the situation of the country Naturally, people will not take loans with a high interest rate if their wages do not allow this. The bank cannot increase salaries for people, and is forced to lower interest rates on loans.
Competition also always benefits consumers. It does not allow banks to increase interest rates, and also provides potential borrowers with a wide selection of consumer credit programs.
Commercial factors for calculating interest rates on a loan
This includes obligatory expenses of credit organizations. Banks are also forced to pay. So:
- The cost of renting a room.
- Communication fee.
- Pay to staff (cashier-operations, managers, collectors, security, contact center, etc.).
- Risk of loss.
- Various deductions, etc.
Do not forget that the bank is primarily a commercial organization. This means that banks primarily seek to make a profit, and not create favorable conditions for customers. Do not be naive. All these boards are naturally produced by borrowers.
Client factors for calculating loan interest rates
This includes the individual qualities of each borrower. That is it:
- Personal data.
- Family status.
- Personal property.
- Income level.
- Financial opportunities, solvency.
- Place of work and length of service.
- Risk group.
- Credit history.
Each of these factors is taken into account when applying for a loan. The better all these indicators are for the bank, the lower interest rates will accordingly be. So that banks do not spend a lot of time calculating interest rates on consumer loans in cash for each client, they create many lending programs, in the interest rates of which all these factors are already included. Customers just need to choose the right one.
However, due to the variety of credit programs that is observed today, it is very difficult to do, and sometimes even dangerous. If you are not confident in your abilities, you can always turn to loan professionals.