Choose a Low Rate Loan

2007-03-08 10:33:40

( Financial )



A loan is a contract between you and the loaning institution that entitles you to borrow a specific amount of money under the condition that you will pay the institution interest all the while the loaned money remains unpaid. The rate of interest usually depends on the required collateral or equity, the required papers and documentation, and the speed of processing. A low rate loan usually has stricter documentation and collateral requirements and a slower speed of processing.

A low rate loan is better than a high rate loan. If you are for instance buying a home and would like to take out a mortgage to finance it, then it would be better to choose a program with a low mortgage rate. First of all, you are probably going to hold on to that mortgage for a long time. If you plan to spread out your payments to the full thirty years that some mortgage companies offer, a low rate of interest means more savings in total interest payments than one with a higher rate of interest. Even if you expect to move within five years, you will still save money when you stick to a low rate loan than a high rate one.

There are a lot of offers that have a low mortgage rate so a low rate loan shouldn’t be very hard to find. Banks, credit card companies, mortgage companies, and lending institutions in general offer a low rate loan in the hope of convincing you, the consumer, to become customers. The interest you pay for the money you borrow becomes the lending institutions’ main source of revenues. A low rate loan spread out over a number of years means a healthy profit overall.

Consequently, before you settle on a particular loan plan or mortgage, you should draw up a list of mortgages or loans on offer and compare the interest rates. Narrow down your choices to low rate loan offers. Next, narrow your list further to those loans or mortgages that offer the lowest mortgage interest rates. Finally, you should pick the lowest rate loan that offers the most flexible payment terms.

Of course, it would be better to pay off the loan as soon as you are able to so that you can gain even bigger savings. Be sure to choose a low rate loan that has no penalties for early payment.


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