Before we start discussing how to get lower personal loan interest rates, it’s important to understand what they are. Here are its 5 main features:
(one) They are unsecured, which means you don’t need to have collateral to get the loan;
(2) Due to the lack of collateral, they usually attract higher interest rates;
(3) lenders give you this loan only on the ‘faith’ that you will repay the money in full and with interest;
(4) you need to have an excellent credit score to be considered for them;
(5) Due to all the 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 a great credit score, it is very difficult to get approved at a really low interest rate.
Having said all that, you can still borrow money from lenders. So now let’s see how to get lower rates for personal loans using these 4 practical tips.
1. Increase your credit score.
The best way to reduce the interest on these types of loans you get 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 will pay the money back. So how do you raise your credit score? Make your payments on time, don’t open new accounts, and pay off as much of your debt as possible.
2. Ask lenders to lower interest rates.
If you’ve been able to increase your credit score, consider asking your lenders to lower your rates. It is difficult for this to happen but it is possible. Banks can lower the 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 your score has improved, 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 your current loan is at, then refinancing may be a good option. Use the excess money to pay off the old loan.
4. Consider getting a secured loan.
This might be possible if you have a home and there is equity in the home. Another way to get a secured loan is to use your car title to get a secured car title loan. You can also secure the loan based on any assets you have that banks accept, for example jewelry. If you already have an existing personal loan that has high rates, getting a secured loan at the lower rate will help you pay off the old loan.
These are the steps that many people, myself included, have taken in the past to get these types of loans at really good interest rates. I believe that by following these steps, you will also be able to get personal loans at rates that are comfortable and manageable.