- Personal loans are a flexible way to borrow.
- It pays to shave as much off of your costs as you can.
- You can save by improving your credit score, waiting to apply until rates are lower, and shopping around with different lenders.
You could eke out some nice savings.
When you need money, whether to fix up your house, repair your car, or pay off medical bills, you may be inclined to apply for a personal loan. The upside of getting a personal loan is being able to use your loan proceeds for any purpose. And you'll generally pay less interest on a personal loan than you will on a credit card.
Plus, personal loans tend to close fairly quickly. When you apply for a mortgage, for example, it can take many weeks from the time you get the ball rolling to close on your home loan. With a personal loan, you might apply at the start of the week and have your money before the week wraps up.
But if you're going to take out a personal loan, you might as well do what you can to snag the lowest rate possible. That will keep your monthly payments at a more affordable level. Here are three steps you can take to score a good deal on a personal loan.
1. Boost your credit score
Personal loans are somewhat risky from a lender perspective. The reason? They aren't tied to a specific asset that can serve as collateral.
When you sign an auto loan, your lender is somewhat protected if you don't keep up with your monthly payments. That's because it can repossess your car. That same protection doesn't exist with a personal loan.
As such, personal loan lenders put a lot of emphasis on having great credit. The higher your credit score, the less risky a borrower you present as.
Lenders will generally reward personal loan applicants with strong credit with lower borrowing rates. So if you want to save on your personal loan, it pays to do what you can to boost your credit score.
How do you do that? One way is to pay all bills on time. Another is to check your credit report for errors. Correcting mistakes could help your score improve pretty quickly.
2. Apply when rates are lower in general
These days, personal loans are more expensive due to the Federal Reserve's rate hikes. So even with good credit, you might end up paying more interest than you'd like.
But if you wait for borrowing rates to come down in general, you might lock in a much better deal than what you can get today. So if you don't have a pressing need for money, holding off could be a wise move.
3. Shop around with different lenders
As is the case with mortgage lenders, when it comes to giving out personal loans, each lender sets its own rate. The simple act of shopping around could result in a fair amount of savings.
Rather than accept the first loan offer you get, gather rates and details from different lenders. Keep in mind that there can be fees and closing costs to pay on a personal loan, so you'll want to compare those as well.
Perhaps one lender is able to offer you a more competitive interest rate on a personal loan than another. But you'll want to make sure that lender's fees don't negate the savings involved.
Taking out a personal loan could end up being a smart move. But if you want to snag the best deal, make a point to boost your credit score, compare offers, and apply at the right time.
Our picks for the best personal loans
Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.
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