Low Interest Rate Loans

Every tenth of a percentage point on a loan makes a big difference on the amount of interest you pay over the life of the loan. It’s worth the extra time and effort to dig until you can push that rate down as low as possible. Finding low interest rate loans can be hard work, but it’s work that pays pretty darn well. You have to stop thinking about just the avoidance of interest payments, and start thinking about the purchasing power and investing power of the money that stays in your pocket when you manage to find that lower rate. Here’s an illustration:

Let’s say I’m looking for a low interest rate mortgage loan. I need to borrow $250,000 on a 30 year fixed rate loan. My first opportunity is to get the loan at 6.5%. Those terms give me a mortgage payment of $1,580.17. By the time I pay the house off I will have sent the lender right around $319,000 in interest payments. We’ve all seen those numbers a hundred times, but it never ceases to amaze me.

Anyway, let’s say that instead of a 6.5% interest rate I manage to get a 6.25% rate. Now my payment is $1,529.39. So it saves me about $40 per month (lets my husband and I go out to dinner one extra time per month – not bad), but the big payoff is in the interest saved over the life of the loan. By the end of the term I will have paid around $304,000 in interest. $15,000 is a healthy chunk of money, and that’s why it always pays to look for a lower interest rate.

Okay, since we’re on the subject, we might as well talk about how to save even more money on interest on your home loan or any other loan you borrow. Add $100 per month to your payment. You’ll save $70,000 in interest and pay the house off in 25 years instead of 30. I know that’s not completely related to this article, but it’s always worth mentioning that a true ‘low interest loan’ is one that gets paid off early by a disciplined borrower.