When taking out a personal loan, you want to do what you can to get the lowest rate on offer for your unique situation. Rates vary between lenders and are also based on a range of factors. Here, we give you three of our top tips to try and get a lower rate on your personal loan.
Do some research
Lenders often advertise their lowest rate, but what you qualify for could be higher. That’s what it’s always important to know your options in advance.
Of course, with so many lenders offering different rates, it could be time-consuming to ring each one of them just to find out what interest rate they will charge. At Motor Vehicle Finance we work with a number of lenders and can do the research for you, to come up with a competitive rate for your loan.
Know your credit rating (and take action if need be)
Your credit rating is one of the biggest determinants of what rate you will be offered. Generally, borrowers who are perceived to be low risk (a good credit score) will enjoy lower personal loan interest rates than borrowers who are higher risk.
With a number of factors determining your credit rating, there are actions you can take to improve your credit score.
Your credit rating isn’t just based on whether you have had any ‘bad debts’; it’s also based on your timeliness with meeting your other commitments, even phone and power bills. Being late paying these bills can negatively affect your credit rating – which could mean a higher personal loan interest rate for you.
And it’s not just your bills; if you are late with loan or credit card repayments, this will also affect your overall credit score. Make it a priority to meet all your commitments on time, to build that good credit rating.
If you are unsure what your credit score is, you can usually find out for free from a credit provider, such as Creditsimple.
Apply for secured finance
Offering the lender security, usually by way of a vehicle or property, gives the lender more comfort about your intent to repay the loan.
This is called a ‘secured loan’, and generally speaking, secured loans have lower interest rates and higher borrowing limits. This is because if you don’t make your loan repayments, the lender has the right to sell the asset you offered to recoup the money owed to them.
Some lenders don’t offer secured loans though; they will only lend to borrowers with a good credit rating and past repayment history. In addition, homeowners can generally get access to better credit limits and rates, as they are seen to be ‘more stable’ than those who don’t own their own home.
We have access to a range of lenders, so we can make sure your application goes to the right lender for your situation; if you have security, we can work with that to try and get a lower rate for you.
If you think a personal loan is right for your needs, make sure you do your homework before signing on the dotted line. Putting in place our three simple tips could see you enjoy a lower interest rate, saving you money over the term of your loan.