How to Get a Low Interest Loan

A personal loan can be a great way to consolidate debt, finance a large purchase, or cover an unexpected expense. Getting the best interest rate is important when looking for the right personal loan.

Lower rates can save you hundreds or even thousands of dollars in interest over the life of the loan.

What Is an APR? 

Before you take out a loan, it’s essential to understand the annual percentage rate (APR).

The APR is the cost of taking out a loan, expressed as a percentage. It includes interest, fees, and other charges you’ll pay over the life of the loan.

The APR can vary depending on the lender, the type of loan, and the loan terms. For example, a personal loan with a longer repayment period will typically have a higher APR than a shorter-term loan.

However, APR is not the same as your interest rate, even though these terms are often used interchangeably.

Instead, the interest rate is how much the lender expects you to pay for the loan. APR, on the other hand, includes the interest rate and additional fees you’ll be expected to pay to the lender.

Different lenders may use different methods for calculating APR, so a good practice is to compare APRs when shopping for a personal loan.

How to Negotiate a Lower Interest Rate

While this can be tough to do, there are ways to negotiate and increase your chances of getting the best deal possible. Here are a few tips to help you get started.

Negotiate With the Lender

One way to negotiate for a lower APR is to compare rates from different lenders.

You can join a loan marketplace that matches you with multiple lenders. Lending services each offer additional terms and compete with each other at the same time.

You can then use the competing offers to get the best price with a lender of your choice.   

Another way is to ask the lender if they’re willing to lower the APR. After all, lenders make a living by providing you with a loan, and they likely won’t be too happy to lose a customer.

They might find some room to offer you lower rates if that means they get to keep you as a borrower.

Find a Cosigner

You can also lower your APR rate by getting a cosigner. This is someone who agrees to sign the loan with you and be held responsible for the debt if you default on the loan.

Additionally, you can lower your APR rate by signing up for an autopay discount.

Many lenders offer a discount between 0.25% and 0.50% if you agree to have your monthly payments automatically withdrawn from your bank account. It’s a good practice to use regardless of the discount.

Speaking of helping your credit score, you can always refinance your loan as your credit score improves through good practices.

Refinanced loans typically have lower APR rates and offer a grace period of no APR whatsoever.

Use a Collateral

Using collateral can also help you qualify for a lower rate. Collateral is an asset you pledge to the lender as security for the loan.

If you default on the loan, the lender can seize the collateral and sell it to repay the debt.

Loans backed up by collateral typically have lower APR rates compared to some of the leading unsecured loans, which usually come with higher credit score requirements.

Choose a Credit Union 

Because credit unions are not-for-profit organizations, they typically offer better interest rates on loans and credit cards than for-profit banks.

In addition, credit unions often charge lower fees for services like ATM withdrawals and account maintenance.

As a result, credit unions provide a more affordable option for consumers looking to save money on their financial services. 

Opt for a Short Repayment Method

Finally, if you choose a shorter repayment period on your loan, your APR will decrease. This will save you money in the long run, as you’ll be paying less interest over the life of the loan.

Things to Watch Out For

First, make sure that you understand all of the terms and conditions of the loan before you sign anything.

Second, be aware of any fees or penalties that could be charged if you make a late payment or miss a payment altogether.

Finally, remember that a low APR doesn’t necessarily mean you’re getting the best deal possible - it’s important to compare all of the terms and conditions before making a decision.

How to Know You’re Getting a Good Deal

Besides comparing the APR, the length of the loan and any fees or penalties that could be charged are also something to pay attention to.

Once you’ve done your research, you’ll be able to choose the loan that’s right for you.

A good APR on a personal loan can vary depending on the type of loan and the lender, but typically a good APR rate will be lower than 14%.

According to the Federal Reserve, the average APR is 12.29%. You can get a better offer if you have a good credit score or if you are able to get a cosigner with a good credit score. 

Tips For Quickly Paying Off Your Personal Loan 

You can do a few things to pay off your personal loan as quickly and efficiently as possible. Calculate your new personal loan into your debt consolidation plan if you already carry a balance.

Firstly, ensure you’re making all of your payments on time. Setting auto payments is an easy way to always remember your installment.

Not only will this help you avoid the late payment fee, but it will also positively influence your credit score.

With a better credit score come better interest rates on personal loans, so it’s something worth paying a bit of extra attention to.

Second, just paying the amount due each month isn’t enough - you need to pay extra each month to make a dent in the principal. Try to make extra payments whenever you can - even a small amount can be helpful.

Once your credit score improves, you can apply for a refinancing loan with an even lower APR rate. By following these tips, you can save yourself time and money in the long run.