Are you looking for a low interest rate loan? Then there are several factors that will determine the result. Your life situation, finances, credit rating and the type of loan you are applying for will all affect the interest rate.
Please read on and find out important information so you can find the loan that is best for you.
What do you need to borrow?
Step one is of course to figure out what you need to borrow. Is it a mortgage loan for a new home or a mortgage loan for the holiday you are looking for? These two examples differ considerably. A secured loan will always yield a better interest rate than a secured loan. How much you need to borrow and for how long are also two important questions that you should consider.
Say you take an SMS loan of USD 10,000 for 90 days. Assuming you can pay within the framework of the loan period, then the total interest cost on the loan may end up at USD 2,000. If you instead take out a loan on the same amount with 30% annual interest for one year, then the total interest cost will be USD 3,000.
Of course, you get to pay off much more on your SMS loan, but the comparison is for you to think a step further.
In other words, everything is not as black and white as some might wish. So it is not just about finding a low interest rate loan, but you also have to see the total interest cost of the loan.
Your credit rating plays a crucial role
How good and stable your economy is will largely determine what amount and interest you can borrow. To find out, the lender takes a credit report on you through a credit reporting company.
Your credit report contains information on:
- Your income
- Ownership of housing
- Payment notes and possible debt balance
All of this is taken into account and analyzed to then give you a credit rating, or credit rating as it is also called. Obviously, a new job with higher salaries or collateral that can be borrowed will have great significance. If you are married, share housing and have a stable economy together, that too can change a lot.
To explain it easier – a person with an optimal financial situation, collateral and no loans will obviously be able to get the highest amount with the lowest interest rate. However, an uncertain financial situation will produce poorer results. Where you are, you know best yourself.
You can take a credit report on yourself for a better overview if you feel unsure.
Leave nothing outside
No matter what situation you have and what loan you are looking for, it can be good to have everything written up. By everything we mean everything that concerns your finances. Then present this to the lender with a carefully laid out plan for the entire loan period. It can help you negotiate better results.
You may also consider taking external help, such as a co-applicant, to lower the interest rate further.