HOW TO GET THE BEST RATE ON A PERSONAL LOAN?
Maybe you’ve had an unexpected expense crop up and you need a lot of cash and you need it quickly. Or you are looking to consolidate your debt into one monthly payment at a lower interest rate. Personal loans can help you with all of that. But how can you get the best rate out there?
9 Tips for getting the best rate on your personal loan
- Check your credit score. This is the first step. You need to know what you are dealing with and knowing your credit score helps you to know which type of lenders you should begin looking into. There are plenty of websites that offer free credit checks with free scores. Additionally, credit cards often will give you your credit score as an added service
- Improve your credit score. Unless you are one of the lucky 20 percent of Americans with a credit score over 800, you can benefit from improving your score. Your credit score is your key to more appealing loan rates. Check your credit reports and fix any mistakes that might be dragging down your score. Pay your bills on time and try to keep your credit card balances low.
- Shop around. Don’t just go with the first lender that gives you an offer. This is when it pays to take your time and apply with multiple lenders. A difference of even a few percentage points can save you a lot of money. Many lenders will offer soft credit checks, which don’t impact your score the way a hard inquiry does.
- Choose a shorter pay-off period. The less time it takes to pay off your loan, the less amount of interest you are going to be paying. And lenders usually offer better rates for short-term loans.
- Secured loans. Most personal loans, like credit cards, are unsecured. But there are secured loan options out there. Putting up collateral like your home, car, or a savings account can get you a lower rate.
- Watch out for fees. Lenders will charge origination fees and other service charges. Make sure you are aware of exactly how much this is. When you are comparing loan rates you want to look at APR rates, which includes all the fees in the loan. Don’t look at only the base rates.
- Avoid prepayment penalties. Some lenders charge a fee for paying down the loan at a faster rate. Be sure to read the fine print so this doesn’t come as a surprise.
- Add a cosigner. If you have a lower credit score, you may have trouble getting a loan and you won’t be able to get the most competitive rates. A cosigner can help you obtain better rates.
- Look for discounts. Some lenders offer a small discount on the rate when you sign up for automatic payments.
Personal loans can be a great financial tool. Businesses use loans all of the time to increase cash flow and expand services. If you use personal loans strategically, you can benefit from them as well. The more you know about personal loans, the better equipped you will be to getting the best rate and saving money.