Banks do not weigh a single price for all customers. Where some customers get a loan at a lower interest rate and some in higher. When you get expensive and cheap loans from the banks, it is decided by many things, mentioned below:
- The higher the credit score of a person, the more likely it is to get a loan at a lower interest rate. This is why people are advised to keep their credit score good.
- There is less chance of decreasing the capacity of the borrower to pay a loan in short time duration. In this case, the rate of interest is low in the case of short-term loans.
- When a thing is mortgaged against a loan, it reduces the risk of default from the debtor. Therefore, the rate of interest is low, it is an example of a home loan. While the rate of interest is higher due to non-guarantee of unsecured loan such as a personal loan.
- If the borrower has paid the previous loans from time to time and without any issue, then he is expected to get a loan at a low interest rate. Banks always prefer this kind of customers.
- If a bank is offering loans at a lower interest rate with all facilities, the second has to be compelled to keep its interest rates competitive.