When applying for a personal loan, the lenders will use certain benchmarks to determine if you will get the loan. Those factors may also impact the interest rate. There are several ways to ensure you get the lowest rate possible for your situation.
Credit Score
Moving into the process with a high credit score is one of the best ways to get a low rate on a personal loan. The number can range from 300 to 850. Many financial institutions consider a poor score to be below 640. If the number lands somewhere above 700, it is deemed favorable. Anything over 800 is supreme.
A person’s credit history is an essential factor. Financial entities, such as SoFi, note that an individual’s credit score will be strongly factored into the deal when it comes to personal loan rates. It is a good idea to monitor your number carefully and take any necessary steps to get the score high and to keep it there.
Payment Schedule
Next, a lender will want to see if you have paid your other debts on time. Some of the transactions you can use to show a history of timely payments are credit card statements, mortgages, and auto loans.
A technique you can leverage to make sure everything is always paid on time is to set up an automatic payment plan via your bank. If you have evidence that you meet all of your financial commitments as contracted, it will help you get a fair interest rate.
Special Offers
If you do not need the personal loan immediately, you can take your time and wait for a special offer or seasonal deal. Throughout the year, many lenders will have specials to draw in customers. It is not uncommon to see specials popping up just before holidays.
Some ways to find interest and loan deals are by monitoring banking websites and touching base with people at the institutions you already bank with. They can be a valuable resource, and through that communication, you can develop a relationship with managers and loan officers employed at the facility.
Calculate
Lenders can format personal loan rates in a variety of ways. For example, you might be offered a low rate initially, but it may increase three months later.
Interest rates can remain the same through the entire loan, adjust partway through, or you may be paying interest only until the loan comes due. Calculate each offered structure to determine the total interest on the loan.
Income
Employment and sources of income will also come into the picture when applying for a personal loan. It can be helpful if you can show that you have been employed for at least a year.
There are times when it can be shorter, but the longer, the better. If your employer is a state or government entity, this can also be to your advantage. These groups are typically very stable.
In order to get the best personal loan rate, go into the situation with a good credit score, a positive financial history, and employment. These factors play a significant role in the lending process.
