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The following is a guest post from Dr. David L Tuyo II, president and CEO of University Credit Union.
The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.
Securing a loan can be a big financial decision with a lot of implications on your personal finances and your life.
There are many types of loans for a variety of purposes, but it’s always critical to consider certain key criteria in detail before making any final decisions. Even a few small differences between lenders and the loans that they’re offering can have an impact on your finances.
While it shouldn’t be overlooked that other criteria such as term lengths, repayment flexibility, down payments, and collateral are just as important to consider, one of the most important and obvious factors is the interest rate available with your loan.
The interest rate that you secure on your loan will affect the cost of your monthly repayments, the total amount that you’ll have to repay, and how quickly you can repay.
While market rates fluctuate regularly and there are many contributing factors that can affect the interest rate that a lender may offer you, here are a few strategies that you can apply when you’re seeking a loan.
Credit scores are just one factor that lenders use to evaluate the risk profile of a borrower. Generally, lenders are more likely to provide better rates to borrowers with a higher credit rating.
Some lenders will favor borrowers with a better interest rate if they set up automatic repayment withdrawals. This provides more certainty for the lender that monthly payments will be made on time and consistently.
Credit unions can typically provide better interest rates on loans since they’re not-for-profit financial institutions. This means that they can pass down profits as savings to their members, which is usually represented by better interest rates. Community banks are for-profit institutions, but they‘re usually a better option than larger banks
A loan is a long-term commitment, so it’s always wise not to rush your final decision. There are a wide range of options available in the market. Therefore, it’s important to know which factors are most crucial for you before you reach an agreement.
Here are a few additional tips to consider when seeking out a low-interest loan:
Ultimately, the final decision rests upon your shoulders and it’s crucial that you thoroughly research all of your options, fully understand what’s available to you, and compare your offers with a critical eye.
Loan agreements can be complicated and difficult to understand, but it’s important that you never skip over anything if you don’t understand the implications. Seeking out clarification on any offers that you’re considering is your right and responsibility. And, a close inspection of an agreement now can save you many potential issues in the future.