How’s your profile? Not your selfie profile, you’re credit profile. Taking selfies during your caravan holidays and travels is par for the course. But there is a far more important ‘selfie’ that RV buyers seeking a personal loan for caravan should be taking – a ‘credit selfie’. Reviewing individual profile in regard to credit score and credit rating. Why? Because the credit rating of a caravan loan applicant plays an integral part of the loan application assessment and can impact the interest rate offered by the lender.
In short, caravan loan applicants with a better credit profile are typically offered a better interest rate. When browsing rates currently advertised for a caravan loan by different lenders, there will usually be a condition noted which refers to the rate being applicable to applicants good credit profiles and for new caravans.
The interest rate on a caravan loan is integral to the total cost of the loan and the monthly payments. Being offered a lower rate can represent a real savings in the total cost of what the caravan is actually costing you and in the repayments.
Another issue which increases the significance of aiming for the lowest interest rate is the current interest rate scenario. In May 2022 the RBA made its first rate rise in over 12 years to tackle the surging rate of inflation. This was followed again in June with another quite significant rise. Further increases in the cash rate have been flagged by the RBA Board. These could come at any time over the course of 2022 when the RBA Board holds it monthly meetings.
When the RBA moves, lenders follow. So facing an unavoidable situation of interest rates on the way up, caravan loan seekers need to see what is avoidable. What can be somewhat avoidable is being, being offered a higher interest rate because of a poor credit score. The process of addressing this situation can start with addressing the credit profile.
Credit Profiles, Scores and Ratings
There are several main terms connected with credit ratings – profile, history, scores and ratings. Scores and ratings are essentially the same. This is a number or a band range which is calculated based on a set formulation by credit reporting agencies. Poor or bad is zero and the best is 1,000 or 2,000 depending on the agency. A profile is the overall picture of the credit history of an individual and includes consideration of the credit score. For those with a lower score, seeking bad credit caravan loans might be a viable option.
Included in the data that goes into calculating scores is the number of loans and the value of the loans that an individual has taken out; the amounts owing on debts, loans and credit cards; the payment history going back quite a few years for bills and loans; any defaults on loans; and a point that may surprise many, how many loan applications have been made or requests to increase the credit limit on a credit card.
A credit profile is not something that needs to be set up by an individual. It is created by credit reporting agencies when credit is applied for. Banks, finance companies, utilities companies and other providers of credit submit information as relevant to these agencies who then add this to the individual’s profile. Negative entries such as poor paying history impact the score negatively.
To lenders, this overall credit snapshot represents the risk rating of an individual. Lenders assess each caravan loan application in terms of the risk of the individual repaying the loan according to the finance terms or the risk of defaulting on the loan.
The higher the risk is assessed then that can translate to a higher caravan loan interest rate being offered. So clearly, that is a situation to be avoided wherever and however possible. There are ways to avoid this risk and there are ways to fix and improve a credit score, which we will share.
Accessing and Reviewing a Credit Profile
Reviewing and acting on credit rating issues should ideally be carried out before new loan applications are made or on a regular basis to ensure no errors are listed. So if you are planning the purchase of a new caravan at some point down the track, start the process with a credit profile check.
A good resource for information on how to access a copy and how to fix any errors is Moneysmart.
While there are advertisements running offering services to access credit scores, individuals can access a copy themselves free of charge. Refer to Moneysmart for the options. Once the profile is obtained all the entries should be checked to ensure they do relate to you and they are accurate. There is a process to follow in order to correct any inaccuracies and repair any errors.
Credit Scores and Calculating Caravan Loans
The credit profile provides lenders with a certain level of information about an applicant. Additional information is also provided in the application around the assets and liabilities or personal balance sheet of the individual. This can impact the risk assessment and hence the interest rate offered.
Reducing the level of debt prior to making a new application for a caravan loan may improve the overall profile. This includes paying down balances on credit cards.
As we mentioned above, when a loan application is submitted, lenders will report this for inclusion on a credit report. Multiple applications made for the same loan can be viewed by lenders negatively. It can appear desperate. In many cases, the individual may genuinely be trying to source the cheapest caravan loan.
The workaround for this is to engage the services of Jade Caravan Finance as your broker. When we canvass our multitude of lenders to source the cheapest interest rate loan for our customers, that process is not reported or reflected in the credit report. So we can not only save you money by accessing cheaper interest rate loans, we may be able to save a negative impact on your credit report.
If you’re wondering exactly what the impact of a slightly higher interest rate on a caravan loan might look like, use our Caravan Finance Calculator to find out. Enter a purchase price and finance term vary the interest rate and see how that affects the repayments.
Achieving the cheapest interest rate caravan loan offer is a priority for most caravan buyers. So take action and check your profile to improve your prospects.
Contact Jade Caravan Finance on 1300 000 003 for assistance in sourcing cheap interest rate caravan loans
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.