How to Find the Lowest Loan Rates

2007-10-15 12:53:47

( Financial )



Difficult Task of Looking for the Right Loan

The average American is paying for at least one type of loan, whether it's a home mortgage, student loan or credit card balance. While loan offers abound among lenders and on the web, it is a tedious task to look for the right loan to fit your needs. The easiest loans to qualify for have tougher repayment terms, like unrealistic down payment requirements and sky-high interest rates.

You also need to satisfy some personal and economic conditions to get qualified for lowest loan rates.

Getting Qualified for Lowest Loan Rates

The biggest factor in qualifying for the best loan rates and easiest terms is your credit record. You must be able to show sufficient debt history as well as payment performance, which should be unblemished by any past due accounts or bankruptcy actions.

But a high credit score is not easy or fast to come by. It takes years to build an above average credit rating and this involves lots of discipline and diligence on your part in paying back all your obligations.

With this policy, you will have a difficult time getting the lowest loan rates as a first time borrower. Your best bet is to get the lowest loan rate that has been offered to you, and then look for cheaper refinancing terms after a few years.

The size of your loan is also a major factor. Jumbo loans of half a million dollars or more usually charge the lowest loan rates compared to smaller loan sizes.

The type of loan is also a factor. Adjustable rate mortgages tend to have lower interest rates than fixed mortgages, but you also take the risk that they can sometimes overshoot fixed rates during unstable years. Unsecured loans such as credit card facilities also have much higher interest rates than secured or mortgage loans.

If you're a government employee, you may be able to qualify for lowest loan rates for your home mortgage. A low income status will also qualify you for government assisted mortgages. And if you're borrowing for educational purposes, you will also expect low rate loans and more lenient repayment schemes.

Precautions and Pitfalls

With today's internet technology, it is simpler to look up the lowest loan rates in the market if you already satisfy the qualifications such as achieving a superior credit score.

Many lending websites post the lowest interest rates almost daily and have built-in repayment calculators to help you decide whether to borrow or not.

Oftentimes, lenders offer these low rate loans only to be offset by high down payment or balloon payment requirements. Some come with higher points or other fees that you have to pay up front.

You can avoid this pitfall if you require your lender to give you a full disclosure of all the terms and conditions of the loan, and not allow yourself to swayed only by rock-bottom interest rates.


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