Article: The Three Largest Factors In Your Interest Rate - Free Reprintable Article

by David E. Brumbaugh
There are three major factors that affect how much you pay for a loan. Understanding these factors can save you time, money and frustration.

1. The Federal Reserve Discount Interest Rate.

Banks and other lending institutions borrow money from the Federal Reserve Banks. The discount rate is the interest rate a Federal Reserve Bank charges eligible financial institutions to borrow funds on a short-term basis. This rate is set by the boards of directors of the Federal Reserve Banks. The discount rate has a direct effect on the “Prime Interest Rate”, which is the interest rate on short-term loans that banks charge their commercial customers with high credit ratings. You can get live information on the current Prime Rate at www.FedPrimeRate.info.

Of the three major factors that affect your interest rate, this is the one you have the least amount of control over.

2. Your FICO Score and Credit Report.

There are companies that gather and sell information about information on where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. They are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau. Potential lenders will get your credit report from the credit bureau.

The FICO score is a method of determining the likelihood that credit users will pay their bills. It condenses a borrowers credit history into a single number.

You can protect your FICO score and credit report by paying your bills on time and not over-extending yourself. You also have the right to have false information removed from your credit report.

3. Lender Business Factors.

Banks and other lenders are in business to make a profit. They also exist in a competitive market. Like all businesses, they will balance their profit margin with competitive factors. If they charge too little, based on your credit history and the prime rate, they risk going out of business. If they charge too much, they risk losing you to a competitor. Therefore, in order to get the best deal you can, you should shop around.

Keep one thing in mind when you are shopping around. One of the things that affects your FICO score is the number of times your credit report has been accessed in a certain period of time. Therefore allowing too many potential lenders to run your credit report in a short period of time could be counterproductive. Three or four is typically a safe number. If you request an on line quote from several lenders, they won't typically run your credit report until after they have made their initial quote.

(You must explicitly provide a potential lender with permission to run your credit report. For that, they usually need your Social Security Number.)

In summary, the three major factors you pay for a loan are the prime rate, your credit history (FICO score) and business conditions such as competition. In order to get the best rate you can, you can do two things, keep up a good credit history by paying your bills on time, and shopping around for the best rate.

-------------------------------------------------
David Brumbaugh is the owner and operator of EZandFree.com. EZandFree.com provides consumers with online tools for easily obtaining free competitive Mortgage and Loan Quotes. It also serves as a mechanism by which Mortgage Brokers can obtain legitimate qualified leads from people who need their services.

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Copyright 2004 David E. Brumbaugh. All rights reserved. This article may be published in your newsletter or web site. It must be reproduced in its entirety including the biography and web address.

Note: This article may be freely distrubuted and reprinted as long as the author's information and web link are included at the bottom of the article. The web link should be active when the article is reprinted on a web site or in an email. Minor edits and alterations are acceptable so long as they do not distort or change the content of the article. For more information on reprint rights email:

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464 Words

The Three Largest Factors In Your Interest Rate
by David E. Brumbaugh

There are three major factors that affect how much you pay
for a loan.  Understanding these factors can save you time,
money and frustration.

1. The Federal Reserve Discount Interest Rate.

Banks and other lending institutions borrow money from the
Federal Reserve Banks. The discount rate is the interest
rate a Federal Reserve Bank charges eligible financial
institutions to borrow funds on a short-term basis. This
rate is set by the boards of directors of the Federal
Reserve Banks.  The discount rate has a direct effect on the
“Prime Interest Rate”, which is the interest rate on
short-term loans that banks charge their commercial
customers with high credit ratings.  You can get live
information on the current Prime Rate at <a 
href="http://www.FedPrimeRate.info">
www.FedPrimeRate.info</a>.

Of the three major factors that affect your interest rate,
this is the one you have the least amount of control over.

2. Your FICO Score and Credit Report.

There are companies that gather and sell information about
information on where you work and live, how you pay your
bills, and whether you've been sued, arrested, or filed for
bankruptcy. They are called Consumer Reporting Agencies
(CRAs). The most common type of CRA is the credit bureau.
Potential lenders will get your credit report from the
credit bureau.

The FICO score is a method of determining the likelihood
that credit users will pay their bills. It condenses a
borrowers credit history into a single number.

You can protect your FICO score and credit report by paying
your bills on time and not over-extending yourself. You also
have the right to have false information removed from your
credit report.

3. Lender Business Factors.

Banks and other lenders are in business to make a profit.
They also exist in a competitive market. Like all
businesses, they will balance their profit margin with
competitive factors.  If they charge too little, based on
your credit history and the prime rate, they risk going out
of business.  If they charge too much, they risk losing you
to a competitor.  Therefore, in order to get the best deal
you can, you should shop around.

Keep one thing in mind when you are shopping around. One of
the things that affects your FICO score is the number of
times your credit report has been accessed in a certain
period of time. Therefore allowing too many potential
lenders to run your credit report in a short period of time
could be counterproductive. Three or four is typically a
safe number.  If you request an on line quote from several
lenders, they won't typically run your credit report until
after they have made their initial quote.

(You must explicitly provide a potential lender with
permission to run your credit report. For that, they usually
need your Social Security Number.)

In summary, the three major factors you pay for a loan are
the prime rate, your credit history (FICO score) and
business conditions such as competition. In order to get the
best rate you can, you can do two things, keep up a good
credit history by paying your bills on time, and shopping
around for the best rate.

-------------------------------------------------
David Brumbaugh is the owner and operator of <a 
href="http://www.EZandFree.com">EZandFree.com</a>.
EZandFree.com provides consumers with online tools for
easily obtaining free competitive Mortgage and Loan Quotes.
It also serves as a mechanism by which Mortgage Brokers can
obtain legitimate qualified leads from people who need their
services.

Terms of Use
Copyright 2004 David E. Brumbaugh. All rights reserved. This
article may be published in your newsletter or web site. It
must be reproduced in its entirety including the biography
and web address.

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Page Title:	Article: The Three Largest Factors In Your Interest Rate
Keywords:	personal finance interest rate loan factors how much what, free reprintable article
Summary:	There are three major factors that affect how much you pay for a loan. Understanding these factors can save you time, money and frustration.