Before we start discussing how to get lower interest rates on personal loans, it’s important to understand what they are. Below are their 5 main features:
(1) They are unsecured, which means you don’t have to have collateral to get the loan.
(2) because of the lack of collateral, they usually attract higher interest rates;
(3) Lenders only give you this loan in the “belief” that you would repay the money in full and with interest;
(4) They must have an excellent credit score to be considered for them at all.
(5) Due to all the above points, it is very difficult to be approved for personal loans if you do not have an excellent credit rating. Even if you have an excellent credit score, it is very difficult to get approved at a really low interest rate.
After saying all that, you may still be able to borrow money from lenders. Now let’s take a look at how you can get lower interest rates on personal loans with these 4 practical tips.
1. Increase your credit score.
The best way to lower interest rates on these types of loans you get from banks and other financial institutions is to improve your credit score. This puts you as a good risk in the eyes of lenders, your excellent credit score tells them that you would repay the money. So how do you increase your credit score? Make your payments on time, don’t open new accounts, and pay as much of your debt as possible.
2. Ask lenders to lower interest rates.
If you’ve been able to increase your credit score, you should ask your lenders to lower your prices. It is difficult for this to happen, but it is possible. Banks can lower interest rates on your existing loans. This may not be much, but over the term of the loan, you will save a lot of money.
3. Consider refinancing existing loans.
If you’ve improved your score, apply for a new loan with lower interest rates. Check the current national interest rate on loans. If it’s lower compared to the interest rate at which your current loan is, refinancing may be a wise choice. Use the excess money to pay off the old loan.
4. Consider getting a secured loan.
This could be possible if you have a house and there is equity in the house. Another way to get a secured loan is to use your car title to get a car title secured loan. You can also secure the loan based on assets you have that banks would accept, such as jewelry. If you already have an existing personal loan with high installments, a secured loan at the lower interest rate will help you pay off the old loan.
These are the steps that many people, including me, have taken in the past to get these types of loans at really good interest rates. I believe that if you follow these steps, you can also get personal loans at interest rates that are convenient and that you can manage.
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Wendy is now a financial analyst and writer. Wendy has been writing about finance and personal finance since she was a sophomore in high school. She has also been writing for several online publications and published in The Huffington Post, and Forbes Woman.
Wendy is a credentialed financial analyst and has experience working with financial institutions and businesses. Wendy is also a certified financial planner. When Wendy's not writing, she enjoys tending to her many plants, watching TV, and spending time with her family.
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