It’s always exciting to get a new personal loan. Whether you’re using it to consolidate debt, finance a large purchase, or anything in between, a personal loan can give you the extra financial boost you need.
If you’re in the market for new personal loan, you may be wondering what you can do to get a better interest rate. Keep reading to find out.
Once you understand the answer to “what is an installment loan,” you’ll realize that not all personal loans are created equal. In fact, these products vary greatly from lender to lender. That’s why it’s in your interest to shop around and explore the various options at your disposal. When you do, be sure to compare the rates of any personal loans that pique your interest so that you can choose the best one.
Improve your credit
Your credit will play a role in the interest rate you receive. Generally speaking, the higher your credit score, the better rate you can expect. If you don’t have the best credit, you may want to improve it before applying for a personal loan. Pay your rent, mortgage, car loan, credit cards, student loans, and other bills on time. Also, reduce your debt and only apply for credit when you absolutely need it.
Check your credit report
Lenders will pull your credit to help them decide whether they should approve your personal loan application. As errors and inaccuracies on your reports can bring down your credit score and increase your rate, it’s important to review them carefully and dispute any inaccuracies you find. Visit AnnualCreditReport.com to get free copies of your reports from the three major credit bureaus, Equifax, Experian, and TransUnion.
Apply with a cosigner
If you have a trustworthy friend or family member with good to excellent credit, you may want to ask them to cosign your personal loan. By doing so, you may be able to secure a better rate than you’d be able to on your own. Just keep in mind that if you fail to repay your loan for any reason, your cosigner will be responsible for it.
Many lenders allow potential borrowers to prequalify for personal loans without hurting their credit. If you fill out a short form and prequalify, you’ll get an idea of the interest rates and terms you may be eligible for. It’s smart to prequalify for several personal loans to help you determine which lenders may offer you a better rate.
Collateral is an asset that can be used to secure a loan. Secured loans usually have better terms relative to unsecured loans. Using collateral can help to lower the interest rate on a personal loan because it provides you with security in the event that the you’re unable to repay the loan. If you defaults on the loan, the lender can seize the collateral and use it to recoup their losses. This security can help to lower the risk associated with lending money, and as a result, lenders are often willing to offer lower interest rates to borrowers who are willing to use collateral.
Even if you don’t have good or excellent credit, these strategies can help you get a better interest rate on your personal loans. Since better rates have the potential to save you money, it’s well worth your time and effort to try to land them. Best of luck!