How to Get a Low Interest Personal Loan

Where to Find Reputable Lenders to Obtain Inexpensive Finance

Sep 4, 2009

Qualifying for a low interest personal loan can be quite difficult. Also known as signature loans, they are granted without the borrower providing collateral.

For the cash-strapped individual, a personal loan can make a huge difference when there is a need to raise extra cash to pay off debts, take a vacation or make home improvements. However, depending on the lender, interest rates can be high to excessive, making it a very expensive option over the long term.

A low-interest personal loan is difficult to recover if the borrower defaults and an expensive lawsuit is usually the only recourse open to the financial institution. Because of this, the lenders’ criteria for making such loans is more stringent.

Lenders require that borrowers have good credit rating, a good income and financial stability before granting a personal loan.

How to Find a Low Interest Personal Loan

Approach family or friends for a loan – While some may be reluctant to go this route, why not ask? Be prepared to explain exactly what the loan is for and how it will be repaid. Family or friends may lend money without charging interest if they are convinced there will be no issue with repayments – sign a contract if necessary.

Usually the older generation, most of whom have been used to living frugally, will be happy to lend money if they can see that it is used in a careful way to build up assets, such as building an extension on a home.

Compare Online for the Best Loan Deal: There is a lot of competition among lenders, so comparing online is a good place to start looking for the best terms and interest rates.

Approach a lender where there is an existing relationship: If a borrower has a good name with an existing lender, the lender may be open to negotiation if a borrower can prove his or her good credit rating and regular income.

Low Interest Government Loans: In the US, low interest loans and grants are available for college, small business start-ups and even home repairs. Other countries also offer similar loans and grants; an online search should reveal what is available in the applicant's country of residence. A borrower will stand a better chance of being granted a loan if he or she shows evidence of responsibility and a good credit score.

Student Loans – Typically, student loans offer a low interest rates and the student does not have to start paying back the loan/s until six months after graduating.

Approach a Financial Planner – A qualified financial planner will be able to advise the borrower on the best route to take in applying for a personal loan and provide tips on how to pay off debts, build a good credit history and build wealth.

Personal Loans to Avoid:

No matter how desperate an individual may be to get a personal loan, be very careful of fake lenders, scam artists and loan sharks. Keep up to date with the latest scam techniques making the rounds.

Avoid advance fee loans or payday loans. No-one should compound their financial problems by getting deeper into debt and the interest rates payable on these loans are usually anything but low.

If a borrower is careful to maintain a good relationship with a reputable lending institution and conscientiously pays the loan back, there will be a good chance of obtaining another low interest personal loan in the future should the need arise.

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