How to Find the Best Loan Rates

How to Find the Best Loan Rates

Financial institutions do not lend money to borrowers for free. Instead, they charge interest for the service based on the amount of money borrowed (also known as the principal sum). Many factors can influence interest rates, including supply and demand, inflation, the government, various types of loans, and (of course) the likelihood that the borrower will default on the loan. Your interest rate will greatly affect the total amount you pay for your loan, so learning how to find the best loan rates is well worth your time.

How to Find the Best Loan Rates

Work on Your Personal Financial Situation

We can't talk about how to find the best loan rates without discussing your part in the process. Lenders take your financial situation into consideration, because it affects your ability to repay the loan. For example, they will likely look at your credit score, your income (which will ideally be stable from month to month), your employment history, and your down payment. People who receive fantastic loan rates have often spent years cultivating a solid foundation for borrowing. 

Learn About Loans 

Remember to consider the total loan amount by factoring in the term of the loan (i.e., how many years you will have it). Borrowers are often surprised that some shorter loans with higher rates cost less overall than longer loans with lower rates. Scrutinize the fees involved as well, and note that "no-fee" loans simply combine the fees into the interest rate.

In addition, ask how the lender will calculate interest on the loan. Will they use pre-computed or simple interest? Pre-computed interest never varies, because it is calculated using the loan's original balance and payment schedule. Simple interest, on the other hand, benefits those who are able to increase their payments. It calculates the interest amount on the day of the payment, so if you begin paying more than your regular monthly amount, your balance and interest rate will both shrink, saving you money.

Compare Lenders 

If you want the lowest interest rates possible, you better shop around. Visit several lenders and compare the rates they offer. If you settle for the first loan presented to you, you may regret your rash and reckless decision. After all, how often is a first choice the best choice? Additionally, although banks may come to mind first when you need a loan, they're rarely the best option. Look into a variety of other lenders before deciding to borrow from a bank.

Visit Your Local Credit Union

Credit unions are an excellent alternative to traditional lenders, as they typically offer favorable loan rates to their members (i.e., account holders). Because they are nonprofit organizations, their operating costs are low and their lending rates are often quite competitive. Don't be afraid to join a credit union just to take advantage of the great loan rates (but do yourself a favor and check out their other services as well).

For excellent loan rates in southwest Missouri, stop by BluCurrent Credit Union. We offer a variety of loans, including auto loans, home loans, signature loans, share loans, and home equity lines of credit. With our flexible payment options and low interest rates, you can find a loan that fits your budget. To learn more, please stop by one of our three branches or give us a call at 417-887-1983.

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