Personal loans come in handy to cover significant expenses such as weddings, education, home improvement, or an emergency. But accessing these loans can sometimes prove a challenge because APRs range from 5% to 36%, meaning it’ll be costly to repay your loan. This is why you need to search for the personal loan that offers you the least loan rates to save as much money as you’d want.
One advantage is that the interest rate charged by lenders isn’t cast in stone. Therefore, there are different techniques you can employ to negotiate for lower interest rates for your loan. Without further ado, here are six tips that can help you get a better deal for your loan.
1. Improve your credit score
The first thing to do to increase your chances of getting a lower interest rate on your personal loan is improve your credit score. Typically, the greater your credit score, the more likely you’ll qualify for a better rate, and this is the case despite lenders having different requirements for their loans. With this in mind, you want to put in a little extra effort to improve your credit score, and it can pay off big time by qualifying you for lower interest rates.
Your credit score is of great importance because it acts as a measure of your creditworthiness. This means the greater your credit score, the better your chances of getting a personal loan at the lowest interest rates. Therefore, you must improve your credit score to boost borrowing power and get access to more personal loan options at a lower interest rate. The different ways you can improve your credit score include;
- Clearing your debt
- Rectifying errors showing on your credit report
- ● Limiting new credit inquiries
- Making all of your future payments on time
After implementing these measures, your credit score will improve, but this will slowly increase over time with careful monitoring and attention.
2. Add a cosigner
It might be hard to convince a lender to give you a loan at a low-interest rate if you have a bad credit history. In such instances, it might be best to have someone with good credit co-sign your loan to qualify for lower interest rates. The cosigner agrees to take on the legal responsibility for paying off the debt if you default on your loan repayment. This means that if you stop making payments, your cosigner will be on the hook for them. Also, if you default on the loan, it will damage the co-signer’s credit rating as well as yours.
3. Compare offers of different lenders
Many different lenders are offering personal loans at competitive interest rates. Therefore, it’s best to compare multiple offers since this will help you find the best rate. Besides the fees, make sure to also consider all fees and terms of repayment before selecting a lender. This is especially vital if you’re still trying to pay off existing debt or cover an unexpected expense.
While shopping around for the best interest rate might look time-consuming, the end result could save you thousands of pounds over the loan term. Therefore, it’s certainly worthwhile, and in the end, you’ll get a loan for your needs. It’s best to find a lender who offers you personalized interest rates because this doesn’t do too much damage to your credit score.
4. Shorten your repayment term
Typically, the longer a repayment term, the more interest you will pay over time. So if you’re looking for a loan with low-interest rates, it’s best to consider a short-term loan or one that has a shorter repayment period.
It is always a good idea to try and pay off your loans as soon as possible. This helps you save money on interest payments and also can help improve your credit score. But with the right lender, you may be able to find a loan with a shorter repayment term and lower monthly payments. This will help you get out of debt faster.
5. Make use of professional credentials
If you have a high salary, your professional credentials can come in handy during your negotiation for a lower interest rate on your personal loan. This is because the lender sees lending you to be less risky and more willing to offer a lower interest rate. This can be further boosted if you work for an established and reliable firm because there’s proof you can always pay your monthly repayments on time.
Therefore, you should consider handing your lender your valid income proofs such as income tax returns, and you’ll be granted much better rates.
6. Build a relationship with your bank
Another technique of getting lower interest rates is making your loan application with a financial institution or bank with whom you have an existing relationship. This is because such a lender knows your income stability and loan repayment history. In addition, lenders tend to favor their existing clients and provide them with better deals such as lower interest rates. So if you have a great relationship with them, such as maintaining a fixed deposit account with them, you’re certainly going to get improved interest rates.