7 Smart Tips for Finding a Personal Loan with a Good Interest Rate

Americans have borrowed a total of $120 billion in personal loans in 2018 alone. When you’re in the market for a loan, there are several factors you need to consider–the most important one being the interest rate.

Interest rates can make or break your decision to get a personal loan. High-interest rates can land you in more debt than you started with.

How can you find the most inexpensive way to borrow money? Take a look at these tips that’ll help you get a personal loan with a good interest rate.

1. Raise Your Credit Score

Unfortunately, poor credit history can make your interest rate outrageously high. Some of the cheapest personal loan rates are reserved for those with good credit.

If you’re unsure of your credit score, the first step is to find out what it is. Credit card companies often provide you with your credit score. Otherwise, you can find your score on various credit score websites.

A bad credit score can be improved in less than a year. All you have to do is open up a secured credit card account and avoid the bad habits that hurt your credit score. Paying your bills on time, and spending less money with your credit card are just some of the ways you can improve your score.

2. Get a Cosigner

A credit score on the lower side can still get you a loan, but that usually means you’ll be hammered with high-interest rates. To get around this scenario, you can add a reliable cosigner with good credit.

The lender will take both your cosigner’s and your credit score into account. Since your cosigner has a higher credit score than you, that means that you’ll be able to obtain a personal loan with low-interest rates.

3. Consider Personal Loan APRs

Although interest rates are an important factor to consider when shopping for personal loans, APRs are just as significant. Don’t forget to compare APRs and interest rates to make sure that you’re not going to end up paying more than you expected to.

You might be wondering: “What is a good APR for a loan?” Like interest rates, APRs are also determined by your credit score. By improving your credit score you can access lower APRs as well.

4. Take Out a Secured Loan

Instead of taking out a personal loan, consider a secured loan. The difference between secured and personal loans is that personal loans don’t involve collateral. On the other hand, it’s necessary to provide collateral in exchange for money with a secured loan.

The collateral can be anything from auto equity, home equity, investments and more. With collateral, it’s more likely for lenders to offer low-interest loans to those with poor credit scores, as the lender has less risk.

5. Avoid Loans From Banks

You might think that a bank is the best place to go for a loan. However, that’s far from the truth.

Banks don’t make much money off of personal loans. This makes them more likely to raise interest rates. If you decide to ask your bank for a personal loan, expect their rates to be higher than other lenders.

Since banks aren’t the ideal lender, credit unions are your next best bet. Credit unions are non-profit, which enables them to have more competitive interest rates compared to banks. Check out your local credit union, but be aware that they still might have some fees.

6. Get Rates from Multiple Types of Lenders

Banks and credit unions aren’t the only places where you can find a personal loan. While you should check out loan rates from these institutions, you shouldn’t be limited to them. There are plenty of other places to obtain a personal loan, and they might even be more affordable.

Here are some other lenders you should consider:

Online Lenders

Loans aren’t always done in person. In fact, you can obtain a loan online.

Loans from online lenders often have lower interest rates. Since they’re not subject to the same costs and regulations of physical banks, they’re able to offer low-interest loans.

LoansUnder36 is a reliable option for finding loans online. To learn more info, check out this site for a full overview of LoansUnder36.

Peer-to-Peer Lending

Peer-to-peer lending doesn’t mean that you’re taking a loan from one of your friends. This type of loan is done through companies that hook you up with an investor.

These investors aren’t found on Wall Street. They’re just the typical person who has extra money to spend. Peer-to-peer lending is basically just a method for average people to borrow from each other.

Loans From Friends and Family

Loans from a close friend or family member can help you avoid interest rates altogether. You won’t even be stuck wondering “What’s a good interest rate for me?”

You might feel uncomfortable or embarrassed about asking for a loan, but your friends and family will usually be happy to help. As long as you come up with a clear contract and responsibly make payments, you shouldn’t have a problem.

7. Ask About Discounts

If you do choose to go with a lender, you should definitely find out if they offer personal loan rate discounts. Lenders sometimes provide discounts to those who sign up for automatic payments.

These discounts are usually only 0.25%, but it still makes a difference. Lenders usually incorporate the discount into the rate that they advertise. Make sure to use automatic payments to take advantage of a lower rate.

Finding a Good Interest Rate

You won’t find a good interest rate if you limit your search to only a few institutions. Keep track of the quotes you get from various lenders, and compare them to find the most affordable option. If you’re still unable to get an interest rate that works for you, then take the necessary steps to raise your credit.

It can be a struggle to get a loan with bad credit. When you don’t the time to improve your credit score, you’ll need to start looking at other options. For more advice, check out our article on how to get cash when you have bad credit.

Join our newsletter

Get financial tips from a licensed professional directly to your inbox.

Powered by ConvertKit

Speak Your Mind

*