Everyone wants to save money. This is even truer when it comes to availing personal loans. Think about it. When you are thinking about taking a personal loan, the only thing on your mind is to get the best personal loan rate. Isn’t that right? And, you are not alone. Every single person out there wants to get the most out of their loan by paying as little interest as possible. So basically, people are hunting for the best personal loan rate that they can get.
So, what exactly is the best personal loan rate? Simply put, the lower the APR or Annual Percentage Rate, the better for you. What you will have to pay each year to repay the loan depends on your APR. So, your best personal rate will be the one where the APR is the lowest. When you opt for that particular loan, you save the maximum amount of money.
But figuring out the best rate is not a very easy task. So, to make it easier for you here are 6 ways you can get the best loan rate for yourself.
#1: Don’t Go To The Banks…Not Yet
When you think of a personal loan what pops into your mind first? The banks, of course. But, do keep in mind that banks make very little money off personal loans. They have little or no incentive to offer competitive rates for you. It does not really hurt to ask. So, you can ask your bank about the rates they offer, but don’t have high hopes.
Chances are, the rates might be a tad bit higher than what you may find elsewhere. A lot of people make the mistake of taking a personal loan from their bank without analyzing other options. If you want to get the best personal loan rate, you will have to do some research on your own and not go to your bank right away.
#2: Figure Out What’s Best For You
Interest rates on loans often depend on the tenure of repayment and the principal amount. So, the first thing that you need to do is figure out how much you need and how long will you take to pay it back.
Different money lenders will charge different rates for different repayment periods. You can use a tool like this to see which financial institution offers you the best deal. It will tell you the APR of different lenders and how much you need to pay every month. So, you can adjust the parameters yourself and figure out exactly how much you need to borrow and for how long to make it a beneficial arrangement.
#3: Search The Internet
You might find your best personal loan rate on the internet rather than in the banks. There is an increasing number of online money lenders on the internet. Since their overhead cost is definitely lower than that of brick-and-mortar banks, it is possible for them to offer better rates. However, exercise a bit of caution and do some research before committing to a digital lender. Read any and all reviews that you might find to make a more informed decision.
#4: Improve Your Credit Score
If you want to get the best personal loan rate, you will have to ensure that you have a good credit score. The higher your credit score, the better is your chance of getting a cheaper interest rate on a loan. So, if you want to improve your existing credit score before you want to take on a loan, you should go for it.
Try paying your bills on time and use your credit card as less as possible. A good credit score will display your creditworthiness. It will exhibit that you are financially stable and worthy of a loan.
#5: Peer-to-Peer Loans
The concept of crowdfunding has opened up a lot of avenues. One of them is peer-to-peer lending. There are a lot of websites that offer this particular service. What happens is that you apply for a loan and an individual investor or a group of investors will lend you the money depending on your credit score and other factors. Of course, it depends on your situation whether this will be a better deal or not.
But, in a lot of cases, the low-interest rate that you might find here turns out to be the best one. It might also be a good option for those who do not have a great credit history to apply for a loan and get approval.
#6: Ask The Right Questions
You will have to ask the right questions if you want the best personal loan rate out there. APR is pretty important but what’s more important is how your lender calculates the rate of interest. Ask them if they are calculating it using simple interest.
If that’s the case, then the interest will be calculated on the outstanding amount on due date. So, the more you pay the lesser will be your interest. Since the interest rate is precomputed, you don’t need to worry about variations. But this depends on when you want to pay back your loan.
If you want to get rid of it as quickly as possible then this is what you should focus on. But, if you need more time then APR will be a more important factor for you.
Taking a loan is a big commitment. There are processing fees as well as interest that is involved. Before taking a loan, make sure that you are taking the right decision. More importantly look for options and do not settle for a bank right away. Search on the internet and compare different personal loans offered by different institutions. Then, make your move and opt for the loan that offers you the best deal.