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Low Interest Loans


One aspect about which every borrower cares is the interest rate. Interest makes the maximum component of cost of loan and this is the reason why borrower wants to keep this portion to the minimum. Though interest is applied by the lender, getting low interest loans is in the hands of a borrower up to some extent. In other words, by use of prudence, low interest loans are possible. Before understanding how it is possible, let us know about the benefits of low interest loans.


First and foremost benefit of low interest loans is availability of more money in the pocket of borrower. This is because each month, borrower has to make payment for the loan installment. Amount of this installment is inversely proportional to the available money in hand. If installment is large, fewer dollars would be there for spending. In contrast, if monthly installment is low, there would be more dollars available. On same principal amount, numbers of dollars available for spending would depend upon the interest that has been applied in the loan account. If rate of interest is low, overall installment amount would be low. Second important benefit is that by saving good amount each month, which happens in case of low interest loans, some assets can be purchased in due course of time. A person can also meet the expenses related to education, medical treatment, etc efficiently if monthly installment is low. There would be no requirement of approaching a payday loan center or any friend or relative for fulfilling cash requirements. Another important benefit of low interest loans is relaxed starting of loan repayment process. In initial years, a large part of installment is gone towards paying interest whereas only a small amount of principal is paid off. In case of low interest loans, there can be a smooth start.


How To Get Low Interest Loans


Many steps and strategies have been suggested by experts for getting low interest loans. Actual application of these may differ from one type of loan to another. Let us try to understand these in generalized manner.


Credit score or rating is the most important factor affecting the availability of loan at low rates. This factor is applicable in all types of loans. Even in case of business or commercial loans, business credit rating is obtained for determining the interest rate. Needless to say, people with excellent credit would be gifted with low interest loans. Even lenders like to provide loans to people that have excellent credit rating. On other hand, if due to some reason, a person has not been able to maintain a healthy credit rating, chances of low interest loans become bleak. Similarly, people with no credit history are unable to get low interest loans. What happen then? Above statement does not mean that low interest loans are not possible. But applicability of statement changes in such loans. If a person has bad credit, for him, low interest loans would not mean lowest interest rate loans. Rather, affordable and comparatively lower rates would be his main target. Whether a person has excellent credit or bad credit, searching for numbers of lender would always be favorable. In other words, main mantra for getting low interest loans is maximum search for lenders. There are many ways in which this work can be accomplished. For example, a person can contact all lenders in an area over phone or can visit them personally. Similarly, search for lender is efficiently carried out online. It is advised here that before applying for the loan amount, a person should try to improve his credit score. This can be done by obtaining a secured credit card at a low rate and maintaining the payment schedule for some months. Once credit gets improved, available numbers of lender for affordable interest rate increases considerably.


Type of loanselected also matters a lot when it comes to interest rate application. As is quite obvious, secured loans are offered at lower rates as compared to unsecured loans. Thus, a person should try to fulfill his requirements through secured loans. For example, in United Kingdom, secured personal loans are one of best options available for fulfilling cash requirements. All homeowners are eligible to get these loans. Contrary to this, if a person applies for unsecured personal loan, not only he would be paying quite high interest rate but also the loan amount would be reduced drastically.


Another step that a person can take for getting low interest loans is offering of higher down payment. This step may not be applicable to people having excellent scores. This is because they are already offered with 100% financing along with low rates. But for a person with bad credit, this factor can work perfectly. By increasing down payment from 5-10%, a person can expect a reduction up to 0.25-05% in the applicable rate of interest. Lenders feel more satisfied when LTV is reduced. For example, if a person wishes to get a car loan for $15000 and interest rate applicable is 11.25%, lender would be happy to reduce it to 10.9-11% if 20% down payment is made. It should be understood that offering higher down payment is more beneficial than offering additional security. There are many legal issues related to selling of security to recover the loan amount. Most of these issues are tedious ones and all lenders like to avoid these issues. Large down payments relive pressure on lender to a good extent and same is benefited in the form of low interest rate.


Sometimes, choosing short repayment periods also fetch low interest loans whereas longer period loans attract higher rates. It is advised that a person should check this out with every lender as policies regarding repayment period differ greatly from one lender to another.


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