Posts tagged: personal loans low interest

Low Interest Rate Personal Loans: Short-Term Help for a More Secure Future


With today’s economy causing job losses and cut hours, it can be difficult to keep abreast of financial obligations. Mounting credit card debt and missed bill payments can be a slippery financial slope. Even for those of us able to pay our bills, replacing an old sofa, having necessary automobile repairs done or taking that dream vacation can become unattainable goals. One way to acquire some ready cash is to apply for a low interest rate personal loan.

A low interest rate personal loan can also be used to consolidate debt, relieving the worry of juggling multiple payments. Using a credit card may be a tempting alternative, but the interest rates are customarily higher. Teaser interest rates offered by credit card companies often end after a trial period, leaving cardholders with a large balance and a high interest rate.

Low interest rate personal loans are unsecured loans. A secured loan is one for which the borrower has put up collateral such as a house or a vehicle. An unsecured loan is one for which there is no collateral. Lenders are gambling that the borrower will pay back the loan based on their financial history. If a loan is defaulted, the lender has nothing.

Unsecured loans are approved under rather specific conditions. An excellent credit rating will determine not only whether the loan is approved, but also the interest rate of the loan. Lenders will look at the borrower’s payment history, employment record and income. Because low interest rate personal loans are unsecured, they tend to be of smaller amounts, usually only a few thousand dollars. Low interest personal loans can be recourse for people who do not own a house or a vehicle valuable enough to be considered collateral.

If a person has bad credit, there are several online lenders who claim to approve loans for anyone. Online lenders should be thoroughly researched and their terms carefully evaluated. Caution should be exercised when borrowing from a lender not affiliated with an established institution. Hidden fees and high interest rates can be ugly surprises for the unwary. A safer course is to improve a bad credit rating and apply at a credit union or bank. Choosing an institution familiar with you and your payment habits can help your chances for approval.


Low Interest Personal Loans – Possible?


Personal loans are nearly universally expected to carry terrible interest rates and ludicrous fees because people almost always think of them as payday loans. But that’s not completely accurate. You can also think about personal loans as signature loans, and those can very often be had at low interest rates.

So let’s talk about what it would take to lock up low interest personal loans. What’s the most predictable qualification for a low interest rate on any loan, personal or otherwise? That’s right, it’s a good credit score. If you want a bank to hand over a chunk of money with based on nothing but a signature and a handshake, it will only be because they can look at your credit history and see that it’s basically immaculate. I’m talking about a 700+ fico score. If you don’t have that taken care of, don’t expect to qualify for a personal loan with low interest.

But it doesn’t end there. The bank wants you to have a good credit score, but there’s something else they want you not to have, which is too much debt. Part of their analysis of you as a borrower is going to be to look at all the monthly payments you’re responsible for and then add the minimum payment that will come with the loan they’re about to give you. If that minimum payment will push you past a certain monthly payment load, no loan for you. I’m actually very glad that lenders have this practice. I know they only do it to protect their bottom line, but it also protects your bottom…line.  Working hard for your money and then watching it all flow right back out due to your high monthly debt service is a recipe for burnout and stress. You don’t need that headache.

So I guess part of the low rate personal loan equation is either not having much other debt, or having an income so high that your monthly debt isn’t a big factor. But I’m guessing that’s not the case with most people looking for some short term financing.

In any case, take good care of your finances. If you can’t get low rate short term loans now, work at it and the day will come. Of course, when that day comes you may not (hopefully) need them anymore. :)