Best Personal Loan Rates – When Can You Avail Them?

2007-03-08 10:33:40

( Financial )



Personal loans are those for non-business purposes, which may either be secured personal loans like mortgages and home equity loans, or unsecured personal loans like cash advances on credit cards. Interest rates differ for each of these personal loans.

You may safely equate best personal loan rates with the cheapest loan rates in the market. Three factors determine if you can get the best personal loan rates: collateral, term, and size of loan.

Rates on credit card advances cannot be the best personal loan rates for you. The interest that you pay on an unsecured loan (which is granted based on your salary) is expensive because you don’t have to put up collateral (an asset you pledge that can be sold to pay off the loan in case you default).

Interest rates on mortgages and home equity loans are generally lower because they are secured by your home as collateral. Most often you can get the best mortgage rates when prevailing interest rates are low. The best mortgage rates also translate into the best personal loan rates.

Most lenders charge you a higher interest rate if the duration of your loan is longer. The farther in time the loan will be paid, the greater is the uncertainty that you will repay your loan. Lenders may give you the best personal loan rates for a shorter term.

You may also get best personal loan rates for a bigger amount of loan. The interest rate that is charged to you reflecting loan administration costs (costs on loan agreement execution, loan monitoring and payment collection) depends on the amount of your loan. The costs decrease as the size of your loan increases.

To find the best personal loan rates, you must shop around. Call your brokers or visit their websites to gather information and compare lending rates.


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