Interest Rate Guide

How to Get the Best Interest Rate on Your Loan

One of the most common finance questions borrowers ask is: “What’s the best rate?” While interest rates are heavily advertised online and on television, the reality is that loan pricing is based on lender risk assessment — and no two borrower profiles are exactly the same.

Quick Takeaways

Interest rates are based heavily on lender risk assessment.
Credit score is one of the biggest pricing factors.
Deposits may improve lender pricing.
Newer vehicles generally attract lower rates.
Employment and residential stability matter.
The cheapest rate is not always the best overall loan.

Why Advertised Interest Rates Can Be Misleading

Many advertised finance rates include disclaimers such as:

“conditions apply”
“approved applicants only”
“from rates”

This is because lenders do not apply one universal rate to every borrower.

Interest rates are risk-based and are tailored to the borrower profile, the asset being purchased and the overall lending structure.

Credit Score Plays a Major Role

Credit score is one of the most important factors affecting interest rates.

Generally:

Higher Credit Scores

Lower Risk Profiles

Better Lender Appetite

More Competitive Pricing

Previous credit issues, arrears, defaults or excessive enquiries may result in higher rates due to increased lender risk.

Property Owners Often Receive Better Rates

Lenders often assess property owners as lower-risk borrowers.

Property ownership may indicate:

financial stability
asset backing
stronger repayment history
lower default risk

Renters and boarders may sometimes receive slightly higher rates depending on lender policy.

The Vehicle You Buy Matters

Vehicle age and type commonly affect lender pricing.

Newer vehicles are generally considered:

lower risk
more reliable
easier to value
easier to remarket

Older vehicles may:

attract higher interest rates
reduce lender options
shorten maximum loan terms

Deposits Can Improve Interest Rates

The amount you contribute toward the purchase can influence lender pricing.

Larger deposits generally reduce the loan-to-value ratio (LVR), which may lower lender risk.

Lower LVR loans may:

improve approval strength
reduce interest rates
increase lender choice
lower repayments

Borrowers financing a very high percentage of the vehicle value may attract higher rates.

Employment Stability Is Important

Lenders often review:

time in employment
industry stability
income consistency
employment type

Borrowers with longer employment history and stable income are generally considered lower risk.

Short employment history or probation periods may reduce lender appetite.

Residential Stability Can Also Matter

Time at current address may also form part of lender risk assessment.

Longer residential history may suggest:

stability
consistent financial behaviour
reduced repayment risk

Frequent address changes can sometimes create additional lender scrutiny.

Business Loans and Consumer Loans Price Differently

Commercial loans and consumer loans often have different pricing structures.

Consumer Loans

Chattel Mortgages

Commercial Asset Finance

Low Doc Lending

Business-use loans may sometimes offer lower rates but may also involve:

higher fees
different payout conditions
commercial lending structures
less consumer regulation

Understanding the overall structure is important before comparing rates alone.

The Cheapest Rate Is Not Always the Best Loan

Interest rate is important — but it should not be the only consideration.

Borrowers should also assess:

early payout fees
monthly fees
loan flexibility
extra repayment options
redraw facilities
settlement speed

For example, borrowers planning to repay the loan early may prioritise flexibility and low payout fees over headline interest rate.

Different Lenders Suit Different Borrowers

Every lender has different policy appetite and pricing structures.

One lender may suit:

first-time buyers
self-employed borrowers
property owners
commercial borrowers
low doc applicants
near-prime borrowers

while another lender may price those same borrowers very differently.

How to Improve Your Interest Rate Position

Maintain a strong credit score
Reduce unnecessary credit enquiries
Contribute a deposit where possible
Choose a realistic vehicle
Stabilise employment history
Reduce existing debts where practical
Compare lender options carefully
Review total loan costs — not just rate

Final Thoughts

Getting the best interest rate involves much more than simply searching for the lowest advertised number.

Lenders assess a wide range of factors including credit profile, stability, asset quality and overall risk position when pricing loans.

Understanding how these factors influence lender pricing may help borrowers structure their applications more effectively and compare loan options more accurately.

Frequently Asked Questions

What affects my loan interest rate?

Lenders commonly assess credit score, deposits, employment stability, property ownership, vehicle age and overall risk profile.

Do property owners get better rates?

Many lenders consider property owners lower risk, which may improve pricing.

Do deposits help lower rates?

Yes. Deposits may reduce lender risk and improve loan-to-value ratios.

Why do older cars attract higher rates?

Older vehicles are generally considered higher risk by lenders due to reliability and valuation concerns.

Does my credit score matter?

Yes. Credit score is one of the biggest factors affecting lender pricing and approval appetite.

Is the lowest rate always the best loan?

No. Fees, flexibility and payout conditions may also significantly affect the overall value of the loan.

Want Help Comparing Loan Rates?

Yes Approved Finance helps borrowers compare loan structures, lender policies and finance options across a wide range of lenders and borrower profiles.

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General information only. Finance is subject to lender assessment, eligibility criteria and approval.