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Rates on Line of Credit

Whenever you open a line of credit you need to pay close attention to the interest rate charged on that line of credit.

The interest rate charge on a line of credit will determine how much you pay for the line of credit. Interest rates are listed in percentages because the percentage of the interest is the percentage by which the balance you owe on the line of credit will increase. The higher the interest rate the more you will have to repay on the line of credit.

Getting the lowest rate of interest on a line of credit will lower the price of that line of credit. Those who get the lowest rates on lines of credit will pay less. Those who get higher rates on lines of credit will pay more.

How to Get the Lowest Rates on Lines of Credit

The best way to get a low rate on lines of credit for the average person is to maintain a good credit or excellent rating. Lenders will give those who have good or excellent credit ratings lower rates on lines of credit.

A good or excellent credit rating is a higher credit rating which means that you have few or no negative items on your credit report. Your credit report is a document that contains information about your credit activity.

Credit reports are compiled by the big three credit bureaus; Experian, Equifax, and Trans Union. Creditors and lenders report negative information about consumers to these bureaus. The more negative on the report the lower the credit score.

Before applying for a line of credit you should get a copy of your credit report and check it. If you see false or inaccurate negative information on your credit report you can have it removed by contacting the credit bureaus. Removing negative information can raise your credit score and help you get a better interest rate.

Comparing Rates of Credit

When you search for a line of credit you should always compare the rates that are being charged on lines of credit. Anybody will be able to compare interest rates charged on a line of credit by going on line.

Websites like bankrate.com and Lending Tree allow a borrower to compare several line of credit offers at once without making any sort of commitment. Comparing the line of credit of offers from several lenders can help a person locate the lowest interest rate.

The Prime Rate

The rate that a person will want on a line of credit is called the prime rate. The prime rate is the interest rate banks offer to their preferred customers who are usually those considered the lowest risk of defaults.

The prime rate is usually offered to individuals with good or excellent credit ratings but others can get it. Those who have a lot of income or can put up a lot of collateral to secure a line of credit might get the prime rate. Businesses that run a lot of cash through accounts might also be able to get the prime rate from their banks.