In order to get the best loan rate, you have to be very careful when borrowing cash. Loan rates usually depend on the amount borrowed.
If you are looking to understand how you can get the best low-interest loans, read this guide we have compiled below.
The loan rates that you get usually depend on the lending institution, the amount that you borrow and the duration for repaying the loan.
Prior to taking a loan, it is highly recommended that you compare all the loans on the table. Consider all types of loans from debt consolidation loans to personal loans.
For example, if you took out a personal loan of £4,500, what would you expect your interest rate to be?
A – Would your interest rate be lower than if you borrowed £5,000?
B – Would your interest rate be the same as when you borrow £5,000?
C – Would your interest rate be higher than if you borrowed £5,000?
It may come as a shock that the correct answer for this question is ‘C’.
You may have expected that if you borrow less money, you will have a lower interest rate. However, in most instances, this is not the case.
So, why do you pay high-interest rates for a smaller loan amount?
It is not really clear why this happens but generally, the APR used by a lender for each loan usually indicates the risk level that the lender feels they are taking and the likelihood they feel they have of getting their money back.
It could be an indication that the lender sees your need to borrow a small amount as an indication that you do not have any savings to use in case of hard times and as such, the lender feel that you are not responsible with your personal finances.
How can you get a loan with low-interest rates?
When you want to borrow a loan, consider all the options available. For example, mortgages come with huge loan amounts and low-interest rates. On the other hand, payday loans come with very little cash but these loans have very high APR rates.
Tips on how to find the best low-interest loans
If you are looking for a loan, check the APR amounts for different loan amounts being offered by a lender. You may find that taking out a higher loan amount will mean that you will have lower interest rates.
If you are worried that you may be tempted to squander the extra money you do not need on taking a huge loan, you can put the extra cash in a savings account or if the lender does not penalize instant payments, you can start paying back your loan immediately.