How to Get The Best Annual Percentage Rates (APR) when Applying for a Loan?

ElitePersonalFinance
Last Update: April 12, 2017 Business Loans College Students Credit Cards Loans Save Money

Annual percentage rate, or APR, is the term used for the interest rate calculated for an entire year, rather than a monthly charge on a personal loan, credit card, vehicle loan, etc. The finance provider averages this amount over the full term of the loan, so that you know at the outset just how much you will have to pay back on your loan each month.

People need personal loans for a variety of reasons, like financing home improvement plans, buying a new car, unforeseen medical bills, and anything else the household cannot pay out of the general budget.

Getting the best APR rate can cut a chunk of interest from the loan repayments and is a huge money saver for borrowers.

There is a lot of competition by loan companies that are vying for business, and this puts prospective clients in a favorable position to negotiate for good deals. If you are able to secure a great deal, it can save you thousands of dollars in the long run.

How to Lower Your APR?

  • Knowing your credit score is of major importance. You can search online for any of the three main credit reporting bureaus, which are TransUnion, Experian, and Equifax. These websites can provide you with your credit score as well as a report, which is what lenders see when you are being considered for a loan. Credit scores can range from 300 to 850, and the higher the score, the better your credit-worthiness, and the better your chances of getting a loan with a lower APR.
  • A low credit score, unless phenomenally low, should not prevent you from getting a loan. However, you may not get a very good APR on your loan, unless you take steps to improve your credit score.
  • Securing your loan with assets such as equity in your home, or a motor vehicle, and perhaps a life insurance policy which you are willing to cede will definitely get you a lower APR that can save you a lot of bucks over the loan period. There is, however, a negative side to secured loans. If you default and do not pay off the loan, you take the risk of forfeiting any assets you signed over as security.
  • Shop around and weigh up your options. A loan from big lenders like banks is not the only choice you have. Loans from credit unions, who are owned by their members are also available. They are often able to offer loans at better rates to those who do not have the best credit scores.
  • When you are done shopping around and have investigated all the possibilities, only sign up for a loan if you are sure you are getting the lowest rate possible.

If your credit score is on the low side and you want to improve it, this can help you get a better rate should you want to take out a personal loan. However, before you decide on fixing your score, think about how quickly you want the loan. A credit score cannot be fixed overnight, and it may take several months before you see an improvement.

You may still qualify for a loan even if your credit score is a bit low, and if you are anxious for the cash, your best bet is to go for the lowest rate you can get, although it might higher than you wanted to pay.

Ways to Improve Your Credit Score

  • Implement better spending habits by resisting the temptation to buy what you don’t need, and cut down where you can on everyday expenses, and entertainment costs.
  • Pay your bills on time, make a concerted effort not to max out credit cards, and create a budget to pay more than the minimum required on the cards. Bear in mind that outstanding debt and unpaid accounts are the main reasons for a low credit score.
  • You can also negotiate with creditors for more favorable payment terms, which will help with your monthly cash outflow.
  • As soon as you begin paying your debts on time with the proper, or agreed amounts, your credit score will rise as you start building new credit.
  • Check your credit report on a regular basis for irregular items that may be affecting your score. If you find anything, you are able to query online through the reporting agencies – TransUnion, Equifax, or Experian.

Here is our complete guide on how to increase your credit score.

Conclusion

Always research lenders that you want to do business with. Opt only for those who are reputable and legitimate, with good reviews. Shop around for the best rates, and if necessary, work hard on improving your credit score which can save you interest charges on future loans.

Unless you are in dire financial straits, do not go for what is known as a payday loan. The interest rates are absolutely exorbitant, and you could end up in a debt cycle that will not be easy to escape from.

A personal loan, with the best APR you can get, is a far better option.

Recommended Articles

Debt

FICO® 10 Score Changes: What You Have to Know About The New FICO® 10 Scores

EPF November 10, 2020

The FICO® Score 10 suite of updates could cause millions of consumers to see their FICO scores drop. This is the biggest update to the scoring model since 2014 when Fair Isaac Corp. released FICO® Score 9. FICO® 10 uses...

Debt

How to Get a Bad Credit Loan and Avoid Payday Loans in 2020? [Complete Guide]

EPF November 5, 2020

  Hello Guys. I’m Angus Scott from ElitePersonalFinance. Thanks for watching it. If you are in the unfortunate situation of having bad credit and need money, watch this video carefully. The bad credit loan market can be a very dangerous...

AS SEEN ON