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Loans Best Rates

The cost of borrowing in the banking terminology is termed as loan best ratesor interest rates. Interest in simpler terms is the additional amount on the principal amount borrowed, which a borrower has to pay to his lender. Interest payment can also be defined as the cost of services rendered by the moneylender. Loan rates are the real pinch for the borrower and it becomes all the more necessary that best loan rates are pocketed from the market. At times consumers may end up paying interest, which are even more than the principal amount. In order to avoid late stage repentance, it is imperative that a well thought decision is taken while opting for loans. One has to choose from the alternative loan rates available in the market.

Types of loan best rates

Every loan has interest rate as its rider. Though loan best rates may differ among the lending institutions and the lenders but the purpose is the same. Loan rates differ for different products and for different types of loans. The general categories into which the loan rates fall are as follows:

A) Fixed rates: Interest rates that remain the same throughout the length of the loan are termed as fixed rates. The moneylender can charge you at the rate settled at the initial stage irrespective of the changes that may take place with the passage of time. The repayment terms are not only predictable but also remain stable. The repayment amount that is defined at the start remains the same till the end, no matter how frequently the interest rates fluctuate. Customers going for long term loans prefer fixed rates.

B) Floating/adjustable/variable rates: Loan rates that are dependent on the Prime Lending Rate (PLR) are termed as floating/adjustable/variable rates. These rates keep on moving up or down depending upon the PLR adjustment done by the federal/central bank. Such rates are market driven and based on the macro economic indicators of the economy. Such rates can be a boon at one particular moment and the very next moment, it may become a curse.

C) Tracker rate: These rates determine the payment amount on the basis of the base rates. More often than not a set percentage above the base rate is to be paid for a particular period or even for the entire period of the loan.

D) Capped rates: Loan rates may rise with the changing economic scenario. However, loan rates that are under the capped rates category don't rise above the predefined level. Interest rates may be capped to rise only 1 or 2 percentage points in a year irrespective of the fact that Loan rates may rise further in the market.

E) Discount rates: Such rates offer a rebate on the given loan rate for a set period.

Choosing the best possible loan rate

The cost of borrowing plays a pivotal role in the borrowing process. Paying the hard earned money as interest pinches customers the most. The need is to minimize the pinch and to keep it within bearable limits, which is only possible by going for the best loan rates.

The best deals can be struck by being a well-informed customer. Loan rates prevalent in the market must be studied and compared with the rates being offered by the lending agencies. Customers who are well informed reap the advantage by making the best deal from the lending agencies. Make the needs amply clear and negotiate on the terms and conditions offered by the lender. The total amount that will be paid should be worked out for both the long term and short-term loan rates. If you intend to buy an immoveable property, long-term loans are the best as on such loans you are bound to get reasonably low loan rates.

To earn an attractive and true loan rate, refrain from misreporting your assets, regular source(s) of income and other related information. Presenting a true picture helps in bridging the gap between the lender and borrower and the reward being an acceptable loan rate.

In the present scenario, loan best rates can be locked for a particular period before finalizing the loan application. The advantage of locking the loan rate is that the locked rate becomes applicable even if the market pushes up the loan rates. Opting for a long locking period is the best proposition.

Tips and steps to get loan on best interest rates.

Taking a loan is a simple job but getting a loan on best interest rates is a challenge. The longer the term of the loan, larger will be the interest payable. The ideal option is to borrow the bare minimum and couple it with the shorter loan term to get the best interest rates. However, there are a few things that need to be thought off before making the final decision.

Examine your current financial position and also pre-empt your financial status over the next few years. Be a realistic borrower and assess your future financial position in a conservative manner keeping a buffer for unforeseen contingencies.

Study in depth the pros and cons of various types of loans and the interest rates tagged to them for getting a feel of the topic and the market trends. Calculate the total amount payable and simultaneously assess your repaying capacity. It is good to study and contemplate the rate trends but never get too obsessed with the rates, as your speculations can prove wrong. Just be comfortable with your decision on the loan rate.

It is essential to understand the duties and the working pattern of the moneylenders. The background knowledge of all the basic aspects involved in the loan processes will also help you find a right lender. Discuss all the modalities of the loan and the repayment schedules with the lender or the lending agency. Make an attempt to get the promise made by the lender in writing.

Once you have zeroed in on a good lender, you can shop for the loan best rates that suit you the most. Take the lender's offer and give him your offer. Bargaining with the lender can be done keeping in mind the fact that his offer is based on the income and credit expenses ratio. Evaluate the lender's offer in terms of the sacrifice you are willing to make for fulfilling your needs.

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