Anyone and everyone taking out a personal loan is concerned about the same thing: the interest rate. The reason is that many individuals strive to find loans that offer as low an interest rate as possible in an attempt to save as much money as they can. Unfortunately, great deals are only given to those with good credit scores, and others with a questionable score will generally have to deal with higher rates while they fix the score.
That being said, we're going to be talking about interest rates, specifically on how factors affect your rates, and what you can do to improve the rates you get:
Factors Affecting Personal Loans Interest Rates
First things first, the factor with the most significant effect on your average interest rate would be the credit score. The higher the credit score, the lower the interest rate, and quite significantly so. For example, a person with around a 700 to 800 credit score can expect an average interest rate of approximately 11 percent. On the other hand, someone else with a credit score of less than 600 can expect interest rates to shoot up to even over 30 percent! That's a massive difference.
Apart from just the credit score, a few other factors play a role in the interest rate you deal with. These factors include your income, employment status, and debt-to-income ratio, all considered by the lender. Lenders look at your employment status to understand your ability to pay, your income to see how much you can borrow, and your debt-to-income ratio to see how much debt you have already incurred. This gives them an overall picture of the risk they put lending to you, and the higher that risk, the higher the interest rate.
How to Get Better Interest Rates on Personal Loans
Knowing that the overall average interest rates for personal loans can lie between 10 to 28 percent, a reasonable interest rate would be near the lower end of the spectrum. However, if you are looking for ways to lower your interest rates, there are a few things you can do.
As mentioned earlier, a credit score has a significant impact on your interest rates. As such, an excellent way to lower the interest rates you are getting is to improve your credit score. This can include paying off your debt on time, refraining from opening or closing too many accounts quickly, paying your bills early, and the likes. Another great way to get better rates is to get different offerings from various lenders, as other lenders may treat your situation differently.
While shopping for better interest rates, don't forget to look for fees as well. They can add to the overall cost of your loan, so understanding how much you have to pay can give you a clearer picture of the overall cost to get the loan.
All in all, everything from your income down to your credit score will have some part to play in the final interest rate of your personal loan. If you find the interest rate too high or unsatisfactory, do put effort into improving it. However, regardless of whether the interest rates you are dealing with are high or low, we highly recommend spending the time looking for trustworthy and professional lenders to ensure that you are getting the most reasonable interest rates possible. They will be able to carefully understand your situation and your needs, creating a loan plan that will not only benefit them but you, too!
When Ends Don't Meet is a loan company offering affordable installments to give borrowers quick money and build their financial health. If you are looking for affordable personal loans in Pelham, AL, get your loan with us today!