How are interest rates REEELY determined?

A

ALFAHOLIC

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Currently my financed amount for my Alfa is at a whopping 19.5% FIXED interest rate, firstly because I is young, secondly because I never had a credit record etc.

now I did a preliminary finance approval at Wesbank, and they too gave me this insane 19.5% fixed interest rate, I'm a year older, I paid my car for a full year without any hassles...why then, why do I still get treated like the slums of ghostmas past (what?)

Any ideas?
 
ask them what they based this high interest on? iirc they have to tell you if you ask. I has to do with the risk you represent.
 
maybe it's the cars you finance... :D

They probably work from some sort of matrix taking variables like age etc. into account under the disguise of risk based pricing, but really only charging the maximum they feel they can before they lose the business.
 
Have you got any other credit record?

My first loan was at prime + 2.5%, which was already pretty high, with the current interest rate, you should be able to pay significantly less.

Prime should be 10.5% at the moment, so if you're really being asked to cough up prime +9%, it's a bit suspect. Granted, mine wasn't fixed, but that should only raise it around 2%.
 
Why are you still wanting to fix it? Yes interest rates may go up but I cannot see them getting that high. Ask what your variable rate would be.
 
they're determined on how many tyres some exec needs on his Cayenne this week.
 
Call other banks and ask for quotes, negotiate with them. From what I remember when I was trying to finance my car, the call centre agents get commision on their sales, and the higher the interest rate YOU accept, the higher THEIR commision. I was able to bring down my quotes from a monthly instalment of R2100 to my current R1600 just by calling around, oh and that's on a fixed monthly repayment.
 
No, I did not fix it, it was this or no car(my first application last year when I financed my car - had no other institution who wanted to help me.)

I'm sure I can get a lower rate at some other place, I have a credit record now only for the past year, and have paid off my credit card each month if/when I use it...they are really really stupid with that premium!
 
I got prime +1 a few months ago.

Almost 3 years ago on first deal, I got prime -1. They're generally giving everyone 1.5-2.5 more than what they would have got a few years ago, due to the current climate.

However, I know for a fact that 2 of the criteria they look at are :

*Ratio of borrowed capital to own capital
*Amount borrowed
*Residual amount (if any)
 
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