Low Interest Personal loans

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Low-Interest loans

If you’re planning to take out an unsecured loan it pays to shop around by comparing loan offers from different lenders, because interest rates can vary quite a bit from one lender to another.

In fact, if you’re hoping to find a low-interest loan it’s absolutely vital that you compare different lenders, because you can’t be sure your existing bank or building society will offer you the best rate just because you have an existing relationship with them. 

Would opting for a secured loan ensure I get a low-interest rate?

Interest rates can vary considerably from one lender to the next, but in theory you should be able to get a lower interest rate if you take out a secured loan instead of an unsecured one.

After all, when you take out a secured loan you’re agreeing to put up a valuable asset (such as a house, apartment or car) as security against the debt, which means that loan represents less credit risk to the lender.

Of course, this is only an option if you have a property or other valuable asset that you can use as collateral, and it also requires you to have built up some equity in the property or vehicle.

If this isn’t an option then it is often still possible to find an unsecured personal loan with a low-interest rate, it just means you might have to shop around a little bit more.

What is the difference between secured and unsecured loans?

Secured loans are loans which are pledged against a valuable asset that you own. In contrast, an unsecured loan, commonly referred to as a personal loan, is based on personal circumstances and risk profile such as your credit history, loan term, and amount.

If repayments aren’t made on a secured loan, the lender can repossess the asset. In contrast, unsecured loans can impact credit scores, make borrowing more expensive, and make it harder for you to borrow money in the future. Both secured and unsecured loans can lead to legal action from the lender if you do not meet your payment obligations.

What are the benefits of Low-Interest Personal loans?

The major benefit of a personal loan is that it doesn’t put your assets, such as your home or car, at risk if you are unable to meet your payments. Whilst this is an attractive proposition for many potential borrowers, there are some drawbacks with a Low-Interest Personal Loan. For example, you’ll usually need to have an excellent credit rating in order to be offered a competitive interest rate on a personal loan. You’ll typically have lower interest rates and higher borrowing limits than credit cards however more harsh penalties can apply to a personal loan if you miss a repayment.

How to get loans with low interest

There are a few ways to increase your chances of securing the best low-interest personal loan. 

• Improve your credit score – Good credit scores will be looked at favourably by lenders and can help you secure lower interest rates on your loans.
• Consider comparing lenders – By comparing as many lenders as possible you can significantly increase your chances of finding the best lenders for you.
• Considering secured loans – If you have assets such as real estate, vehicles and securities to secure against your loan, insurers will typically be more willing to offer you a lower interest rate.
• Applying for loans in good standing – Applying at a time when you are in good financial standing is always the best move as having a steady income, minimal debt, and a low credit utilization ratio will all increase your chances of getting a competitive interest rate.
• Seeking co-signers or guarantors – If you are struggling with a poor credit rating, getting a co-signer or a guarantor can help you secure loans and interest rates that would otherwise have been unavailable.
• Negotiating interest rates – Interest rates are based on the risk you pose to the insurer. Generally, the more risky a borrower is to the lender, the greater interest you will pay on your personal loan. This doesn’t mean that lenders aren’t open to negotiation however as many will be seeking your business.
• Refinancing existing loans – Refinancing any high-interest loans you currently have into lower-interest ones can significantly lower your borrowing costs.
• Paying off debts quickly, and seeking professional guidance – Letting your debt linger is never a good idea, you will end up increasing the total interest you pay on your loan by not paying it off sooner rather than later.

By following these strategies, you can increase your chances of securing the most competitive interest rates available to you and your financial situation.  

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