Before we start discussing how to get lower interest rates for personal loans, it is important to understand what they are. Below are its 5 main characteristics:
(1) they are unsecured, which means you don’t need a security to get the loan;
(two) Due to the lack of collateral, they generally attract higher interest rates;
(3) Lenders grant you this loan only on ‘faith’ that you will repay the money in full and with interest;
(4) you need to have an excellent credit score to be considered for them;
(5) Due to all the above points, it is very difficult to get approved for personal loans if you do not have an excellent credit rating. Even when you have an excellent credit score, it is very difficult to get approved at a really low interest rate.
Having said all that, you can still borrow money from lenders. So, let’s now see how to get lower rates for personal loans using these 4 practical tips.
1. Raise your credit score.
The best way to reduce the interest on these types of loans that 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 the lenders, your excellent credit score tells them that you would pay the money back. So how do you increase your credit score? Make your payments on time, don’t open new accounts, and pay off as much of your debts as possible.
2. Ask lenders to lower interest rates.
If you’ve been able to raise your credit score, consider asking your lenders to lower your rates. It is difficult for this to happen but it is possible. Banks can lower the rates on your existing loans. It may not be a lot, but you’ll save a lot of money over the life of the loan.
3. Consider refinancing existing loans.
Again, if your score has improved, apply for a new loan with lower interest rates. Check the current national interest rate for loans. If it is less than your current loan rate, then refinancing may be a good choice. Use the money left over to pay off the old loan.
4. Consider getting a secured loan.
This might be possible if you have a home and there is equity in the home. Another way to obtain a secured loan is to use your car title to obtain a secured car title loan. You can also guarantee the loan based on the assets you have and that banks accept, for example, jewelry. If you already have an existing personal loan that has high rates, obtaining a secured loan at the lower rate will help you pay off the old loan.
These are the steps that many people, including myself, have taken in the past to obtain these types of loans at really good interest rates. I believe that if you follow these steps you will also be able to obtain personal loans at comfortable rates that you can manage.
