Navigating interest rates: How to find the best personal loan deals

When an emergency rears its head or you need access to money quickly, a personal loan can feel like a dream come true. Unfortunately, if you don’t take care to get the best possible loan terms, that dream can become a real nightmare. While it’s true that the best terms are usually reserved for those with impeccable credit scores, there are some things you can do to get a better deal and lower interest rates when you apply for a personal loan. 

How are loan terms decided?

You may wonder why the advertised rate of interest isn’t what you were offered when you received a loan offer, and the answer is simple. Lenders decide what terms to offer borrowers, what interest to apply and how much they will lend over what period, after assessing your application.

When deciding whether to offer you a loan, a lender will assess your credit score and history, consider your income and employment stability, and look at your current financial responsibilities. The advertised interest rate has to be offered to at least 51% of approved borrowers, but it tends to be offered to those who meet high standards and criteria.

How to get the best terms on a personal loan at short notice

So, you’re concerned about being able to get a personal loan with favourable terms. We have some tips to help you get the best possible deal in your current situation.

Shop around

Finding the best deal requires legwork; don’t go for the most obvious option. While certain banks may offer competitive rates to existing customers, there are online lenders that may offer better terms. Consider reviews in reputable publications such as PostandCourier.com to get an idea of which lenders are highly regarded.

Avoid payday loans

Payday loans can be incredibly tempting because of their promises of quick money, but the interest rates they offer are astronomical in most cases and they are likely to lead to long-term financial difficulties.

Utilise soft credit checks

A soft credit check will give you an idea of what you can expect from a lender without leaving a mark on your credit history. If you are concerned about being able to get a loan, using soft credit checks will give you an idea of where you are likely to find an offer and how good the terms will be.

Borrow only what you need

Borrowing more than you need may be tempting, but it can overburden you in the long term. If you apply for a large loan with questionable credit, you may find it harder to get favourable terms.

Don’t automatically take out PPI

PPI, or payment protection insurance, can be very helpful, but you should take the time to consider whether it is right for you and your situation.

If you need money quickly, you will need to get the best terms that you can at the time. If you are able to wait a little and plan ahead, however, you can improve your credit score to make it easier to get good terms on a big loan, such as a mortgage.

How to improve your credit score in the long term

Increasing your credit score is the best way to get better loans in the long term. If you have a little more time, take these steps to improve your credit score:

Lower your overall debt

This may be easier said than done, but lowering your overall level of debt is the best way to increase your credit score and improve the terms you are offered in the future.

Make payments on time

Missing payments or making payments late will leave a mark on your credit history that may take years to clear. If possible, ensure that you make all payments on time.

Pay more than the minimum on credit cards

Loans may be more rigid, but the flexibility of credit cards gives you the option of paying more or less every month. When you can, make payments above the minimum; this is the kind of thing that creditors will pay attention to.

Check your credit report for mistakes

Things like defaulted loans and missed payments can have a big impact; check your credit report to ensure that no such black marks are placed on your credit report by mistake. If you see a mistake, you will find contact information on sites such as Experian to help you rectify it.

Financial health is a long-term endeavour. Take consistent steps in the right direction and you will see results.