Getting good rates on personal loans

Piggy Bank

There are ways of getting a rate on personal loans which don't end up breaking the piggy bank. Image from Wikimedia Commons.

If you’re getting into the market for personal loans, there are a few things that can help you get the best personal loan rates.

First thing in rates for personal loans is credit score

Your credit score is one of the most important details about your financial life, and it is also significant when you request personal loans.  It may seem unfair, based on past occurrences and not reflective of your present ability to repay a loan, but unfortunately it is entrenched.  To better your chances to get a personal loan, you want to boost your credit score.  Pay off the credit cards, first and foremost. If you have multiple cards, pay them off until you are down to one or two, and keep the balances low.  Even if you have bad debt that’s been charged off, some payment is better than none.

Lay your money down

The more you offer as a down payment, the less you’ll owe on the principle. The less you owe on the principle, the better the interest rate will be and the less you’ll have to pay.  Typically, a down payment is something you’ll only have to worry about with a home or a car.  According to a recent Forbes piece, a 20 percent down payment on a home is beginning to get out of reach. This is part of an overall trend, as the requirements to make that upfront payment loosen.  That practice is starting to get nipped in the bud, so for any large personal loan, expect it to come up.

Shop around and don’t be afraid to refinance

As with any product or service, shop around.  One of the great things about credit unions is that they carry lower risk structurally than a bank does, and often can offer lower rates than some banks.  If a company doesn’t have lavish bonuses to shell out, that means lower overhead.  Also, if you have a large enough loan, such as a mortgage loan, car loan, student loan or business loan, don’t be afraid to refinance once you’re in the right position. Lower interest rates mean lower payments, which means more money in your pocket.