5 steps to getting a low-interest personal loan

May 14 2020, 12:38 pm

With the number of expenses that we need to lead in our lives today, the last thing anyone wants to do is to keep throwing money away at unprofitable things like the interest on a loan. If anything, interests don’t give us any value in return for the money we spend on them, other than extending the duration of our loan term. So, if there’s any chance that one can do to reduce them to the barest minimum, why wouldn’t anyone want to take it?

To that end, here is how you can get your hands on those rare low-interest personal loans.

Step 1) Ensure your home is in order – that is, check your credit report and history

Would you believe if I told you that at least 2 in every 5 credit reports have errors and bad statements on them? Well, strange as that may sound, it is the basic truth. But what makes this even more disturbing is the fact that most credit owners, with errors in their reports, don’t even know. And many of them proceed to request loans from lenders, and as expected, they get turned down or offered a loan at astronomical interest rates.

The report on your credit history goes a long way to determine how potential creditors will deal with you. And if there’s any report on your history to suggest that you’ve defaulted on a payment in the past, used schemes such as IVA debt help to get bailiff help, or made a late payment, a potential lender might decide to charge you high interest.

So before you apply for any loan, check out your credit report, and if there are any errors or bad statements, write a letter of goodwill to your former creditor asking them to pardon your default or past late payment and remove the statement from your report. But be sure to make the letter convincing.

Step 2) Get a cosigner

Another wonderful tactic being used by many low-interest loans seeking applicants is to get a cosigner to agree to take shared legal responsibility for the loan.

Usually, the act of using a cosigner to cosign a loan is often reserved for borrowers with bad credit scores, so as to safeguard the interest of the lender in case the borrower decides to do what their credit report says they did in the past.

However, when you have a good-to-decent credit score and still approach a lender with a reputable cosigner – perhaps someone of a great reputation in the society – the chances are that the lender will be more lenient in terms of the interest charged on your loan.

Step 3) Shop around for lenders

Now that you’ve gotten your former creditor to erase the bad record on your credit report and spoken with that reputable man in your society to cosign with you, the next thing for you to do is to shop around among different personal loan lenders.

Logically, you might be tempted to want to settle for the first lender that you approach. But you’d be surprised to know that there are a lot of variations out there when it comes to personal loans. And the number of lenders you’re able to access will determine the kind of terms you find in the end.

So, you should speak with many potential lenders – such as peer-to-peer lenders, banks, credit unions, and online – and get different quotes from them.

Step 4) Look into getting a secured loan

After making a final decision on the lender to use, you can then approach them with interest in secured loans. Secured loans are loans that are backed with collaterals. Usually, these types of loans tend to carry less risk for the lender, and as such, are offered at reduced interest rates.

Imagine that you’re able to find a consigner, have a decent credit score, shop around for a lenient lender, and still opt for a secured loan, how reduced do you think the interest to be charged on your loan would be?

Step 5) Go for short-term loans

Short- term loans tend to attract low interests because lenders aren’t tying up the money for as long, and there’s less time for something to go wrong that leads to default.

If you can agree to pay back a loan within the shortest time possible, most potential lenders will be willing to have a deal with you at a much-reduced interest rate. However, if you’re scared that you may not be able to fulfill the payments within the short period you’ve agreed, remember that you can always use schemes like an IVA to renegotiate and extend the payment duration.

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