If you’re looking to get the best rate on any kind of loan, there’s one vitally important thing you need to know. Interest rates aren’t everything.
Compare loans from a handful of lenders and you’ll be presented with a whole bunch of different interest rates or APRs. Instinctively, you’ll assume the lowest APR is best.
But what about the additional borrowing costs? What if the lowest APR also attaches administration fees, completion fees, early repayment fees and so on? A low APR is important, but only when coupled with competitive overall borrowing costs.
With that out of the way, we can move on to the crux of the article – how to ensure you get the best possible rate on your next loan. From mortgages to unsecured loans to bridging loans for all purposes, it’s up to you to make sure you get a good deal.
The good news being that it doesn’t have to be particularly complicated – particularly if you follow these five guidelines:
Decide exactly how much you need
Rather than confusing yourself with too many options, work out exactly how much you need to borrow and stick with this figure. There will always be instances where lenders offer lower rates of interest for bigger loans, but do you really need a bigger loan? Even if you end up with a lower APR, you could still end up owing more than you needed to – perhaps even more than you can afford. Decide exactly how much you need and use this figure to compare loan options from as many lenders as possible.
Get to know your credit score
Assuming you plan on applying for the loan in the near future, there’s not a great deal you can do to improve your credit score short-term. In any case, it’s important to get to know your credit score, which will help you understand your position. If your credit score is high, you’ll enjoy total freedom of choice and can apply just about anywhere.
If it’s anything but immaculate, you’ll want to direct your applications at poor-credit lenders accordingly. With the latter, you’re far more likely to be offered a decent deal at an affordable rate of interest with poor credit.
Use an online loans calculator
Whatever type of loan you’re interested in, it’s worth exploring the available options before applying. Using a mortgage calculator, secure loan calculator or bridging loan calculator, you can enter a few simple details and see how the various options affect interest rates and borrowing costs. Decide whether you’d prefer to repay your loan as quickly as possible or longer-term. Long-term loans typically attach much lower rates of interest, but overall borrowing costs can be significantly higher.
Team up with a broker
The average borrower simply doesn’t have the time or the resources to conduct an effective whole-of-market comparison. Precisely why it pays to join forces with an independent broker, who can handle the search process on your behalf.
This can be particularly useful for poor-credit applicants, who may find it difficult to access subprime loan options on the High Street. Working with an independent lender can significantly simplify the process of getting the best possible deal on any kind of loan.
Explore early repayment options
Last but not least, one of the best ways of keeping overall borrowing costs down is to repay the balance of your loan as early as possible. That is, unless the terms and conditions of the loan include excessive fees and penalties for early repayments. This is something that should be explored and discussed before applying for the loan, if you have any intention of repaying it early if possible.
If you struggle to make sense of the complex terms and conditions attached to the loan, ask your broker to explain where you stand in terms of early repayment options.
This article was provided by Donkey.Finance