Before we start discussing how to get lower personal loan interest rates, it is important to understand what they are. Below are their 5 main characteristics:
(1) they are unsecured, which means you do not need to have a collateral to get the loan;
(2) because of the lack of collateral, they usually attract higher interest rates;
(3) lenders give you this loan only on ‘faith’ that you would pay the money back in full and with interest;
(4) you need to have an excellent credit score to even be considered for them;
(5) because of all 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 really low interest rate.
Having said all that you can still be able to borrow money from lenders. So let’s now look at how to get lower rates for personal loans using these 4 practical tips.
1. Raise Your Credit Score.
The best way of lowering interest on these types of loans you obtain 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 pay back the money. So how do you raise your credit score? Make your payments on time, do not open new accounts and pay as much of your debts as possible.
2. Ask Lenders to Lower Interest Rates.
If you have 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. The banks may lower rates on your existing loans. This may not be much but over the life of the loan you will save a lot of money.
3. Consider Refinancing Existing Loans.
Again if you have improved your score, apply for a new loan with lower interest rates. Check the current national interest rate for loans. If it is lower compared to the rate at which your current loan is at, then refinancing may be a wise choice. Use the excess money to pay off the old loan.
4. Consider a Getting a Secured Loan.
This could be possible if you have a home and there is equity in the house. Another way of getting a secured loan is to use your car title to get a car title secured loan. You can also secure the loan based on any assets you have which banks would accept, for example jewelry. If you already have an existing personal loan that have high rates, getting a secured loan at the lower rate will help you pay off the old loan.
These are the steps many people including myself, in the past, have taken to get these types of loans at really good interest rates. I believe if you follow these steps you would also be able to get personal loans at rates that are comfortable and you can manage.