There’s no such thing as a free lunch. This is especially true in personal loans. A personal loan always comes at a cost; however, that doesn’t mean you can’t find ways to take a cheaper loan.
A little research coupled with some strategy can go a long way in finding you an interest rate that suits your pocket. This will help you build up your credit score and reduce the chances of going into debt. Before you start shopping for a personal loan, here’s what you should know.
The Interest Rate Spectrum
Typically, the interest rates on personal loans can range between 4.49% to 35.99%, and you can access them from banks, credit unions, and a host of online lenders. Most of them are just a click away. However, many borrowers believe that getting the lowest loan rate is the goal. Unfortunately, this isn’t true; several factors are important. Moreover, the interest rate on your loan is based on your credit score and history, how much debt you have accumulated through your lifetime, and your income.
Tips to Get the Best Interest Rates
Even if your financial profile is not perfect, the choices you make when taking a personal loan can help you make the best choice possible.
- Check whether your credit score is up-to-date, and review it to understand why it may not be as high as you’d like it to be. For example, if a small debt exists on a credit card that you might have forgotten, paying it off before applying for a personal loan could help you get a better rate.
- If your credit score and history are not as perfect, having a co-signer could help improve your interest prospects. However, always make sure that it is someone you trust.
- Use a loan calculator to understand what the best options are in terms of the best interest rate, as well as the loan repayment tenure. Be careful not to choose a tenure that is so long that it hikes up the interest rate. Find a sweet spot that works for you.
- Online lenders have all kinds of offers and discounts that can help reduce interest rates. For instance, if you set up automatic payments, some lenders use this as a factor to lower interest rates. Check if your bank offers any special discounts.
- Not all lenders have a fee. Try to narrow down the lender choices that do not have a fee, and other hidden charges.
Ultimately, the best interest rate for a personal loan is 0%, but if you have a good credit score and can handle a 5 to 10% APR, it’s not too bad.
Believe it or not, there are tons of lenders willing to offer personal loans, today, especially in a booming fintech economy. Read the fine print and make sure you know all the terms and conditions before signing on the dotted line. Always make sure you pay loan installments on time and never miss a payment. Schedule and automate payments, to stay on track. The key is to stay grounded and choose a lender, interest rate, and payment tenure that works for your habits and income.
To learn more about how to increase your financial knowledge and security, get in touch with the experts at Briteside Solutions today!