In 2019, the exciting thing is Asset Finance Interest Rates are at an all time low, some banks are offering rates as low as 3.5% and even lower interest rates for bigger funded amount 500k plus.
We thought we would take the time to highlight what are some of the key factors that determine an interest rate in asset finance:
1. Time in Business
A customer who has been operating in business for over 10 years would be considered a “lower risk” customer than a business who has only been trading for only 2 months. Established businesses give banks comfort in offering lower interest rates. A newer business on the other hand will always be deemed as ‘higher risk’ as they do not have the proof and consistency that their business has a reliable income to show they can make their finance commitments. With that in mind, higher rates are offered in newer businesses.
2. Age of Asset
The age of the asset you are purchasing can dramatically affect the interest rate. For example, Brand New trucks are considered less risky compared to a 2006 Year Build Truck with high kilometres. Not much can go wrong on a new truck compared to an older truck and this funnels in to how the banks offer their rates on specific assets. Many lenders offering good interest rates generally only like to finance assets that are about 2009 Year Build and above, however if your truck is older, and you want low interest rates the bank will either request full financials and a shorter term e.g. 3-year loan term. There are other banks offering higher interest rates on older assets with a very simple application process as well though.
3. Credit Score
Your personal and/or company credit score will play an important role in the interest rate being offered to you. This means that the higher the credit score you have, there is a higher chance you will also be receiving a lower the interest rate from the banks. If you have an average to excellent credit score (510 to 1200), lenders are more likely to offer you the lower interest rates.
Below average credit scores (0-509) can expect the highest interest rates, this is imposed by banks & lender to offset the “higher risk” in lending money to you as your previous track history when it comes to credit has not been as good as someone with a higher credit score.
Need to check your Credit File? Yakka Finance offer Free Credit Checks for all our clients. Although it’s a cost to us, we always want to make sure we do our checks before we go to the correct bank for your application assessment.
Equifax also offer a free Credit Report every 12 months. You can find the details here: https://www.equifax.com.au/personal/help-centre/credit-reports/get-my-equifax-credit-report
4. Do you have Completed Financials
Whether your business has completed Tax Returns or Company Financials can really determine the interest rate for your next asset purchase (Vehicle, Truck, Machinery or Equipment). Especially for bigger lend sizes over $250k. Banks offering extremely low interest rates will most likely want to have an analysis completed of your tax return or company financials. Yakka Finance are extremely proud of having the ability to assess financials and then be able to secure our clients the best possible rate for their asset purchase with the correct bank.
5. Bank or Lender
Interest rates can vary dramatically from one bank to another. So many factors will come into play when considering which bank would be offering the best interest rates for your next specific asset purchase. Most major banks will offer lower interest rates than a second-tier lender but will have strict lending policy requirements. Second-tier lender have more relaxed policy requirements, but the catch is always higher interest rates.
It’s important to note, many Lenders may have additional loadings to the Interest rate based on several other factors. These include:
- The type of asset being funded
- The year build of the asset
- If the asset is being purchased from a Licensed Dealership or a Private Seller
- If the applicant is a property owner or a non-property owner
At Yakka Finance, we are experts at helping businesses secure the lowest interest rates based on the business and asset they are purchasing.
Want to discuss in more depth?
Please feel free to call Scott Rumble on 0401 214 427 or email at scott@yakkafinance.com.au to find out more.
