Well Qualified Buyer

If you've ever seen a car sales commercial, they often end by saying a finance rate of X%, for “well qualified buyers". If you aren’t considered to be well qualified, you’ll have to pay a higher finance rate.  Why is that?

Let’s say you know two people, both of whom want to borrow money from you. Person A is really reliable. She has a high paying job, and has worked for the same company for over 10 years. She always pays her bills on time, and does not owe very much money.

Person B is pretty much the opposite of A. He just started a new job and doesn’t make very much money. You know that he is often late making payments, and some loans were never paid off and went into collection.

You see that there is a higher risk that person B won’t pay you back, compared to A. So, if you lend money to B you would want to be compensated for the higher risk of him not paying you back or making late payments.

That compensation comes in the form of the loan's interest rate. Lenders view you as a risk.  The higher risk you are, the higher the finance rate you’ll be charged.  So if you want the best finance deals available, pay your bills on time, and don’t owe much money.

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