Taking Out a Personal Loan? Low-Interest Rate Is What You Need
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.
The interest rate on loan is one thing, and an APR another. For those looking to get a personal loan with a low-interest rate, learning more about these rates can make all the difference in negotiating the lowest rates on your 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 personal loan interest rate is the actual interest - 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 Can You Negotiate a Loan’s Lower Interest Rate?
It may be possible to negotiate a rate that is lower than what you were initially offered. While it can be tough to get a low-interest rate, 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 to negotiate for a lower APR is to ask the lender if they’re willing to lower it. 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 personal loan 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. Having a good credit score cosigner can help you qualify for a lower interest rate.
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 providing you with low-interest personal loans and making payments on time will also help your credit score.
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 APR 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 top unsecured loans, which usually come with higher credit score requirements.
Choose a Credit Union
Credit unions are a great option if you’re looking to get a personal loan with a low-interest rate. 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.
When looking for the best way to lower your APR, shop around and compare rates from different lenders before making a decision. By taking these steps, you can be sure that you’re getting a personal loan with a low rate of interest.
Things to Watch Out For When Taking Out a Personal Loan With a Low APR Rate
There are a few things to watch out for when taking out a personal loan with a low APR rate. 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 on your loan - it’s important to compare all of the terms and conditions before making a decision.
How Do You Know You’re Getting the Best Deal on Your Personal Loan Interest Rate?
The best way to know if you’re getting the best deal on your personal loan interest rate is to compare rates from multiple lenders. 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 9.46%. You can get a lower-interest loan 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.
All in All
When acquiring a personal loan, getting a low-interest rate is one of the main things to account for. The lower the interest rate, the less money you will have to pay back in the long run. These tips can help you get the lowest APR on your loan so that you can save money and pay off your loan more quickly. Do some research, compare rates, and ask for a lower rate if possible - by doing these things, you can be sure that you’re getting the best deal on your personal loan.
Which bank has the lowest interest rate on a personal loan?
The answer to this question can vary depending on the lender and the current market. However, at the moment of writing this article, in 2022, the bank with the best low-interest personal loans is LightStream - their APR rates start at 3.49%.
However, it's always a good practice to compare rates from multiple lenders before deciding - sometimes, you can find a better deal by shopping around.
What is a good interest rate on a personal loan?
A good interest rate on a personal loan can vary depending on the type of loan and the lender, but on average, it is around 20%. The lowest interest rate on personal loans offered currently starts at 3.99%. You can get a lower interest rate if you have a good credit score or if you get a cosigner with a good credit score.
Do interest-free loans exist?
Yes, interest-free loans do exist. However, they are typically only available for a short period of time - usually around six months. After that, the interest rate will usually be higher than if you had taken out a loan with interest. It's important to read the terms and conditions of any loan before you agree to it so that you understand the full terms of the loan.
A personal loan with a low-interest rate or even an interest-free personal loan can be a great way to save money on interest and fees, but only if you repay the loan in full within the specified time. Make sure you understand the loan terms before you agree to it to be sure it’s the right choice for you.
For years, the clients I worked for were banks. That gave me an insider’s view of how banks and other institutions create financial products and services. Then I entered the world of journalism. Fortunly is the result of our fantastic team’s hard work. I use the knowledge I acquired as a bank copywriter to create valuable content that will help you make the best possible financial decisions.
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