How Collateral Value Can Influence Your Loan Interest Rate

A lot of people don’t realize just how many different factors go into determining financing rates related to items like printing presses, vertical mills, industrial planers and other types of commercial industrial equipment. The business and owner’s/guarantor’s credit score plays a role in determining your rates, yes – but that’s just one small part of a much larger story. Collateral value, for example, can potentially impact your loan interest rate in a number of ways that are certainly worth exploring.

The Impact of Collateral Value: Breaking Things Down

Generally speaking, one of the major, over-arching factors that influences what your interest rate will be on a loan comes down to how much risk a lending institution is accepting.

Credit cards, for example, tend to have higher interest rates because they lack what is called “repossession value.” If you stop paying your bill, your lender can’t repossess and resell the vacation you financed with the card, or that client dinner that you paid for to win over a new contract.

Items like commercial equipment, on the other hand, are a different story. The chances are high that the lender would be able to A) successfully repossess a woodworking tool like a lathe, and B) sell it to recover a significant portion of their losses. Because their initial risk is lower than it would be in another scenario, your interest rate will likely be lower as a result.

This is also why the interest rates on mortgages can be as low as they are – in the event that your home is foreclosed on, the bank can probably sell the property in question and make back a great deal of their money.

The ENGS Approach

At ENGS, we pride ourselves on serving our customers’ entire commercial finance needs.   We offer equipment lease and loan solutions  on all types of commercial industrial equipment you need to thrive as a business. From wood working tools to machine tools, plastics, and printing.  We also offer  insurance, working capital solutions and more – all in the name of helping you build the type of business you’d always hoped you would one day be running as effectively as we possibly can.

If you’d like to find out more information about how collateral value can influence your loan interest rate, or if you’re just eager to learn about the loan products and terms that can help drive your business forward, please don’t delay – contact ENGS today.