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Online Installment Loans in Alabama
Credit score (or rating) is a key factor in determining the interest rate on installment loans. Why is it so important? The point is that such a score serves as a measure of trust in a borrower, reflecting how conscientiously he fulfills his financial obligations. The higher the rating, the lower the risk for the lender, and, accordingly, the loan rates may be lower.
The Impact of Credit Rating on Loan Terms
In Alabama, borrowers with an excellent credit score (720 and above) can expect an interest rate of about 12.69%. This is certainly a good deal. For borrowers with a good score (690 to 719), the rate will be about 15.92%. This is still quite profitable, although the total return amount will be higher.
If your credit score is between 630 and 689 (fair), the rate can increase to 19.52%. However, if the score drops below 630, the interest rate can reach 21.72% or more, which undoubtedly raises the loan’s expense substantially and may pose a financial strain for the borrower. So, it turns out that in order to get more favorable conditions, it is worth working on your credit rating.
How Is a Credit Score Determined Based On Your Credit History?
Credit rating depends on several factors. First of all, it is your credit history, that is, how promptly you repaid funds on previous loans. The greater the number of good records in your history, the higher the probability that your rating will be elevated.
Another thing to consider is your credit utilization ratio. This indicator shows what part of the available credit limit you use. The lower this percentage, the higher the chance of improving your credit rating and getting more favorable terms for your next loan.
The number of open credits is also important. Having too many open credit accounts can negatively impact your credit score. The length of your credit history matters as well. The longer you work with loans and the fewer delinquencies you have, the better your rating.
Tips to Improve Your Credit Score
Would you like to improve your credit rating and get better terms? We’re happy to share some constructive steps that can speed up this process:
- Check your credit report regularly. This will help you identify errors or inconsistencies that may affect your score.
- Make payments on time. One of the simplest strategies is to keep track of your payment deadlines. Every missed payment will negatively affect your score.
- Reduce your credit card usage. If you have multiple credit cards, try to stay under 30% of the limit on each.
- Don’t close old credit accounts. Long-term credit relationships will enhance your rating.
- Limit the number of credit inquiries. Too many credit inquiries can hurt your score.
Thus, the borrower’s credit score has a direct impact on installment loan interest rates in Alabama (as well as any other state in the US). A strong score can greatly reduce your interest rate, whereas a weak score will cost you much more. We recommend focusing on these simple but effective steps to get improved loan conditions in the future.