A personal loan is an ideal way to consolidate debt, pay college tuition, or pay for a home renovation.
However, so many lenders offer personal loans that finding the best rates and terms can be challenging.
To help you choose the right lender, we’ve compiled some tips that will help you get the low-interest rate you want on your next personal loan:
Get a co-signer.
If you have a low credit score, getting approved for a personal loan on your own might be difficult.
But if you have a cosigner, that person can help you get a lower interest rate. The best thing about having a co-signer is that they don’t need to have good credit.
A cosigner is anyone who agrees to pay your debt if you don’t or are unable to pay it back.
-This can be someone with excellent credit (such as your parent or spouse), but it can also just be someone who trusts and believes in you enough to give their name as backing for the loan.
Shop around for the lowest interest rate.
You might have to shop around for the best interest rate to buy a car.
The same principle applies when getting a personal loan.
When you have multiple options, shopping around for the lowest possible interest rate on your loan is best.
Avoid unsecured loans.
Unsecured personal loans generally carry the highest interest rates and are riskier for lenders, so they can be a tough sell if you have bad credit or have recently declared bankruptcy. According to Bankrate, “unsecured personal loans are generally used as a last resort by borrowers in dire need of money those who don’t have any collateral to secure their loan and must make do with an unsecured form of borrowing instead.
These types of lending products often come with high interest rates because they present more risk than secured forms like mortgages or auto loans.”
Watch your credit score.
One of the most important things you can do to help yourself get a personal loan with low-interest rates is to watch your credit score.
This will help you identify any issues preventing lenders from offering you loans at the best rates.
When you’re looking for a personal loan, it is important that your credit score is in good standing.
The higher your score, the easier it will be for lenders to give out loans at lower interest rates which mean saving money on monthly payments and overall costs over time.
Don’t apply too often or borrow more than you need.
If you’re trying to get a personal loan, it’s important to remember that banks (and other lenders) will likely only lend you money if they can see you have enough income to repay the debt.
That means going into the application process with clear goals and expectations of how much money you’ll need.
Applying too often or borrowing more than you need will make banks look at your situation as precarious, which can work against your chances of getting approved for a loan.
To avoid this issue, one good rule of thumb is “only borrow what you absolutely need,” Even then, consider whether there might be an alternative way of getting the funds instead of applying for a personal loan.
Improve your credit score and track it regularly.
A credit score is a number that shows how likely you are to pay back a loan. It’s based on your credit report, which records your financial history and the information you share with potential lenders.
A good credit score means lower interest rates, while a low score can mean higher interest rates when applying for personal loans.
In general, the higher your score is (and thus the better), the better chance you have at getting approved for loans with lower rates because lenders want to make sure they will get their money back from borrowers like yourself who have proven themselves reliable and trustworthy over time by paying off their debts on time every month without fail so far in life, until now when it’s time for us all to grow up into adulthood – but not yet.
Choose the shorter repayment period
The shorter the repayment period, the lower your interest rate will be. If you choose a longer repayment period, your interest rates will be higher.
The longer it takes to pay off your loan and any additional fees or penalties you may incur will increase according to how long they take to pay off.
That’s because more interest is added over time compared with having fewer months to pay off debt and thus less overall cost over time due to compounding interest rates by paying off sooner rather than later (which works in favor of lenders).
You can use your financial assets as collateral. That means the lender will take possession of those assets if you don’t repay the loan.
The amount of collateral should be equal to or greater than your outstanding balance on loan and must be accessible to the lender at any time.
-This is because lenders need some kind of guarantee that they’ll get their money back and want to ensure there’s no way around repossession if necessary.
Therefore Secured loans generally have lower rates than unsecured ones but also require more work (usually).
Suppose you can secure them through collateralizing property such as a home equity line of credit (HELOC), boat or vehicle title, etc. In that case, this option may make sense for you depending on how much less interest rate difference there is between secured vs. unsecured loans.
In summary, there are many ways to get a low-interest personal loan. If you have good credit, you can often find lenders willing to offer loans with interest rates as low as 7% or 8%.
However, if you have less-than-perfect credit or need collateral for the loan, your options may be more limited.
In any case, it is important that before applying for any type of personal loan, you shop around first to know what kind of interest rates other lenders offer on similar products.