Interest rates on personal loans have fallen by more than 10%.4 steps to secure the best rate

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Need a loan? Now might be your chance to apply.

Key Point

• A personal loan is a great way to consolidate credit card debt, pay for home repairs, and handle large unexpected expenses.
• Interest rates on personal loans are now more favorable to eligible borrowers.
• Whether it’s improving your credit score, finding a co-signer, or shopping with different lenders, there are steps you can take to get the best interest rates.

If you’re considering a personal loan, now might be a good time to apply. Over the three-year period from August 29 to September 3, the average personal loan interest rate dropped by 10.04%, while the average five-year loan rate dropped by 4.56%. A personal loan gives you a lump sum of money that you can spend however you like. A personal loan is a good way to fund unexpected expenses such as credit card debt consolidation, home repairs or renovations, or when you don’t have enough cash to cover them. So what steps should you take if you want to get the best possible personal loan interest rate?

1. Work on your credit score

Paying attention to and improving your credit score is Personal Finance 101. As someone who is spending this year improving their overall financial health, including their credit score, I can tell you Getting and maintaining a good credit score requires some actions that everyone can take.

• Check your credit score regularly. Although you don’t need to check daily or weekly as you can get carried away with the normal fluctuations in your credit score, we recommend using a consumer credit monitoring service to check your score. use credits. You might be planning to apply for a new credit card, buy a house, or in this case, apply for a personal loan. Your credit score puts you in a range of rated numbers from low to excellent. This determines the interest rate for eligible personal loans.
• Check your credit report at least once a year. Also, check your credit report (and AnnualCreditReport.com provides free access to credit reports from 3 major credit bureaus) and you’ve made a payment but it shows up as unpaid or overdue. It’s also a good idea to check for errors such as outdated accounts. in your report. If you find an error, you can dispute it with the credit bureau that records it.
• Pay the invoice in full and on time. Paying your bills on time accounts for the largest percentage (35%) of your FICO score. Personally, I find it useful to have him write out a month’s worth of bills at once on a wall calendar. There are many techniques for keeping your bill and budget, so see what works for you.
• Keep your credit usage low. Credit utilization is the ratio of owned credits to usage. For example, if you have a credit card with a limit of $5,000 and a balance of $2,000, you are using 40% of your available credit, so your ratio is 40%. In general, we recommend keeping this number below 30%. So, if you plan to apply for a personal loan in the near future, pay off your existing debt to lower your ratio.

2. Have someone else apply with you and cosign the loan

If your credit score has improved somewhat, but it’s still not enough to qualify you for the best loan rates on your own, you can ask someone to apply for it. This could be a spouse or family member with more credit. The creditworthiness and income of the other party are also considered, so you can get a more favorable interest rate. However, co-guarantoring a loan for someone else is a big risk. Becoming a joint guarantor puts your finances in jeopardy. Also, not all lenders offer co-signed loans, so do your research.

3. Consider secured loans

If you need help with your credit, you may be able to get a more favorable interest rate on a personal loan by applying for a secured loan. A secured loan is backed by collateral that the lender can acquire and sell to recoup losses if the lender does not pay the loan. So, if you need the money and can provide your car as collateral, you may be able to get an affordable loan. Make sure you keep up with these payments because you don’t want to lose your car or other collateral.

4. Shop

The final step in getting the best possible personal loan interest rate is to shop with lots of lenders. We recommend that you check Many lenders offer easy-to-use online prequalification tools that allow them to offer rates without compromising your credit score (when you’re actually ready to apply, the lender will go through a rigorous credit check to see if your credit score is affected). give) ). Lenders may offer special promotions and discounts for which you are eligible.

If you need money, a personal loan is the best way to borrow. However, do your best to improve your credit score, consider all options for loan types, and shop around for the best deals before borrowing money.