Finding the Cheapest Loan Rates
If you want to find the cheapest loan rates, you have to think of how long you will be paying off the loan together with how much you will need to borrow. Another important factor to consider is your credit history. The majority of creditors that offer low interest rate loans are strict about the borrower’s credit rating. If your credit rating is excellent, you have plenty of options. If it is rather poor, it is wise to improve your rating before approaching the creditors.
In general, crediting institutions use a strategy known as risk-based pricing. The rate they advertise is the typical rate while the one you get may be based on your credit score. By law, creditors are required to offer their typical rate to two thirds of the applicants. If your credit score is particularly poor, however, the lenders may reject your application altogether.
When shopping for the cheapest loan rates, one option is to look for deals online. Many banks and other credit providers have online presence, offering to potential and existing clients an overview of their loan services and products. You have access to creditors across the country, rather than being limited to lenders in your area. This will increase your chances of obtaining a loan at the cheapest loan rates.
Do not use the scatter gun approach when shopping for the cheapest loan rates. Applying with multiple creditors is inadvisable as every application leaves a footprint on your credit file, no matter if you obtained the loan or not. Moreover, creditors are unlikely to extend a loan to a borrower who has applied for credit from several banks. This gives the impression that the applicant is in dire need of money, making him or her a risky client.
If you need a short-term loan, with a term of one year or less, your cheapest option may be a zero percent credit card. You will take advantage of the introductory offer that comes with it – typically up to one year, over which to pay off what you owe without interest.
Looking for a cheap auto loan requires a different strategy. Many car dealers offer low-interest auto loans or a rebate if you are to buy a new vehicle. However, you will rarely get both. A wise strategy involves applying for a low-interest loan with a credit union or bank before visiting the car dealership. There, you can take advantage of the offered rebate. You may want to calculate the payments based on the auto loan’s interest rate, the amount of the rebate, and the price of the car. Some clients opt for a lease rather than borrowing to buy a new car. Leasing usually reduces the monthly payment amounts. When choosing between financing and leasing a car, think of how careful you are about maintenance, how many miles you usually drive, and if you would want to customize the vehicle.
Keep in mind that the reputable creditors do not charge penalties of more than a couple of months’ interest in case you want to pay off your loan early. This is important to check that when looking for the cheapest loan rates – you might want to pay off your loan swiftly. Finally, avoid purchasing payment protection insurance as many credit providers mis-sell it and you will pay a higher price.