The beginning is near the end! I say that because in this series of “how do lenders arrive at interest rates?”, I’ve talked about different factors that affect the rate you pay. But where does that rate originate? It doesn’t start at zero (after all, money is never free). In general terms, most lenders will utilize existing benchmark… Read More »
In our ongoing series of lending factors that affect interest rates, let’s (finally) talk about credit scores and related risk factors. I say “finally” because to many people, the credit score is the be-all, end-all of borrowing. And it is true that credit scores and related risk factors are important, but not always in the way people think. … Read More »
Easily one of the costliest parts of lending are defaults. In short, lenders look to avoid defaults at all costs, since they can be crippling. Defaults are when borrowers, at some point in the loan’s life, cease making their payments. For this post, the reasons why are immaterial – at the end of the day, all that matters… Read More »
Next up in our series of how lenders arrive at interest rates is looking at the true cost of funds. It could also be entitled “How much does money cost?” because, in essence, that’s exactly what it is. One thing that’s helpful in understanding this is to look at money lending as an investment for the lender. If… Read More »
Let’s continue with my series on how lenders arrive at rates. This time we’ll talk about loan types and intended use, which, honestly, is one of the easier ones to explain. In plain terms, most lenders want to know what you are going to do with the money they lend you. This is true for consumer loans (your… Read More »