The most effective way to get a low interest loan
The thing with loans is that they can provide you with a lump sum amount of cash instantly. If you hold a steady job and have a steady income, you can save a small amount every month. However, you can’t use the amount to make a large investment or buy a house or even buy a car. For that you would need a lump sum amount.
Taking a loan ensures that you get your hands on a good amount of cash which you can repay through your monthly savings. The problem with loans is that the interest rate on which they are offered can be very high in some cases. The interest on the loan can prove troublesome to repay and as a result, restrict you financially.
Why Loan Interest Rates are high?
Interest rates on loans are never supposed to be very high, especially when the loans are sanctioned by banks. However, banks take into account a person’s credit score before deciding the interest rate at which to offer the loan.
Your credit score is a great way for banks to see how good you are with repaying loans, with paying bills and with financial constraints. So, if your credit score is high, the bank would classify you as a good investment as the bank would be sure that you would repay the amount back in time. However, if you credit score is less, then the bank would deem you as a risky investment and would thus offer you the loan at a higher interest rate.
This is exactly why unsecured loans, credit card loans and payday loans are all high interest loans. These loans are taken by people whose credit history isn’t exactly spectacular and are hence high risk investments for the lending institutions. Loans – Compare Loans – Secured Loan Comparison.
What to Do In Order to Get Loan at Low Interest
There are ways to actually get a loan at a low interest rate even with a bad credit score.
Ways to get loan at low interest rate include:
Check your credit report in order to see if there are any mistakes in the report. If there are wrong entries or incorrect information in an entry, you can get it rectified which would help in increasing your credit rating. Afterwards, you can apply for a loan at a bank and get one on a lower interest rate.
Go to your credit union. Credit unions are actually created by a certain group of people to help other people who share one or two qualities. For instance, credit unions for people of the same profession, credit union for people with similar jobs, credit union for people belonging to the same community and so on. If you can contact such a credit union, you should be able to secure a loan at a lesser interest rate.
Go for a secured loan. Secured loans are offered by banks as well as other lending institutes and these are offered at very low interest rates. The reason behind this is that you will have to guarantee the bank or the lending institute one of your possessions of high value to the bank or the lending institute in case you fail to pay back the loan amount in time. This arrangement makes the risk factor go down and thus, banks ease up on the interest rate as well.
Get a co-signer whose credit rating is high. If your friend or relative or family member has a high credit rating, you can actually ask them to be a co-signer for your loan, this is know as a guarantor loan. However, you should make sure that you repay the loan on time as any late payment would reflect badly on your cosigner’s credit report.
Try a peer2peer loan. P2P loan arrangements are not as common though there are a number of platforms where you can secure a peer to peer loan. In such cases, a normal individual would review your profile and grant you the loan and also specify the interest rate. It’s a personal loan with an individual rather than a financial institute giving you the money.
You would have to do a lot of work though to convince the lender to give you the loan at a lesser interest rate.
Stay on the lookout for interest rate changes approved by the government’s main bank. The main bank sets the policies and as a result, may approve measures which would make getting a loan or make student loans a bit cheaper cheaper.
So, you should not lose hope even if a bank offers you a loan at a higher interest rate at first. By following one of these tips, you should be able to procure a loan at a lesser interest rate.