Borrowing money is an expensive affair. For this reason, you need to get the best possible terms you can before signing on the dotted line. Below are five tips on how to obtain loans at a relatively cheaper rate.
- Be the Ideal Client
In the eyes of a bank or any financial lending institution, the ideal client fits a particular profile. First, you should have a stable source of income. Secondly, you need to appear stable in every sense of the word – this means staying with an employer for at least two years and residing in the same house for a similar period. Finally, you should demonstrate that you pay your bills on time. Having a long-term relationship with a financial institution will also help.
- Polish Your Credit Report
Your ability to obtain low-interest rate credit is directly affected by the state of your credit report. A bad credit report will negatively affect your cost of credit. A good credit report has two advantages. It eases access to credit, and it lowers the interest rate that you pay on your loan. To polish up your credit report, make sure to pay your bills on time and never let the debt owed on a card exceed the half the threshold of the card. Go through your credit report once every year to expunge erroneous details.
- 0% Credit Card
Taking out a 0% purchases credit card is one of the best ways to obtain cheap loans. While credit cards are often meant for minor expenses and have lower limits than an actual loan, they can come in handy when you want to make a one-off expensive purchase. Nonetheless, this would require you to be very disciplined and manage your money carefully to avoid defaulting on payments. For example, you can use a credit card to buy season tickets for the train instead of buying a ticket every month. The only thing you need to be aware of is that 0% cards are time limited.
- Get A Bank Overdraft
If you need a small amount of money for a relatively short period, then you can use your bank account’s overdraft facility. The reason is that the rate of interest on overdrafts is usually lower than a typical loan. Surprisingly, bank overdrafts are often overlooked by those seeking out loans. Get to know the details of the overdraft facilities that your bank offers and how to take advantage of them.
- Secured Loan
A loan taken out against a security lowers your interest rates significantly. This case applies even in instances where one has a poor credit score. The logic behind this is that the bank or credit lending institution has ‘insurance’ to fall back on in case you default on your loan. The advantage of this is that it secures a low-interest loan for you. The disadvantage is that if you default on this loan, you stand to lose your asset. However, this is a sure-fire way of getting a low interest on your loan.