There are some extremely expensive loans out there. I remember a comment that someone left on one of our other articles that asked if we could offer low interest rate personal loans. It seems like that’s almost impossible these days. Even signature loans at banks are going to cost 11-12%.
There are also loans that are quite affordable. I know a few people who only borrow money through a home equity loan. If they need to buy a new car, they get a home equity loan. If they need to improve their home – they refinance their home equity loan or their home loan. As long as you leave some room in your mortgage and can afford the payments, it’s not a bad way to go. It also makes your car payment almost insignificant.
I’ve given a lot of thought to how people can get low interest loans and thought that today I would help out by providing some solid advice. If you have any questions, please feel free to ask in the comments. I’ll do what I can to help you out.
Step 1: Improve Your Credit Now
It’s not possible to get loans with low interest rates unless you have awesome credit. Unless you’re going to ask your mom and dad for a loan this just isn’t going to happen. Lending money and staying in business is all about risk management and if you’re a bad risk, you’re going to have to pay a lot of interest to get a loan from anyone that’s smart enough to survive long term.
The most important factors in improving your credit score are paying bills on time, paying down your credit cards, and maintaining multiple lines of credit. I personally have four credit cards and am smart about how I use them. Right now they all have zero balances because I pay them off each month. This gives me an on time payment and a low revolving credit balance. These three factors make up more than half of your credit score – don’t slack on any of them.
Step 2: Evaluate Your Financial Position
If you own a home, take a look at how much equity you have. Borrowing with your home as collateral is going to be the cheapest way to borrow money in most cases. Low interest rate mortgage loans are a lot more common than most other low interest loans. Banks have an asset on their books (your home) that protects them in case you get lazy and default on your loan.
If you don’t have equity in your home, your loan is going to be a lot more expensive and you should plan accordingly. A cheap signature loan is still going to cost you 10%, but that’s probably your best option if you don’t have an asset that can be used as collateral.
Step 3: Choose The Cheapest Option
Home loans will be the cheapest loans out there, followed by home equity loans and then auto loans. After that you’re looking at signature loans followed by a lot of BAD loans. Make sure to choose the cheapest option that’s available to you.
Bonus Tip:
Student loans are often the cheapest loans. However, you obviously have to be a student to get them.
