How to Lower Personal Loan Interest Rates
According to Financial Web, personal loans are unsecured loans a bank issues to a borrower solely on the borrower's promise to repay. There is no collateral, such as in a mortgage, and the interest rates are consequently higher than for secured loans. Still, in some cases, it may be possible to lower the interest rate on a personal loan.
Other People Are Reading
Instructions
-
-
1
Work on improving your credit score. The key to lowering your interest rate on a personal loan is to raise your credit score, making lenders feel more confident in your ability to repay. Accomplish this by making payments on time (35 percent of your score), paying off as much debt as you can (30 percent of your score) and refraining from opening new credit (10 percent of your score).
-
2
Ask your lender if it can lower your interest rate. This may not be successful, but it is worthwhile if your credit rating has improved or you have been a good customer of the bank. In some cases, your lender may be willing to lower your interest rate on your existing loan without requiring you to refinance, but this is not common.
-
-
3
Refinance your existing loan. If your credit score is better and/or national and prevailing interest rates have dropped, you may be able to qualify for a new loan with a lower interest rate. Use the proceeds to pay off the old loan.
-
4
Consider rolling the debt into a secured loan. If you have equity in your home, you may want to consider taking a second mortgage or home equity line of credit to pay off your personal loan. You will have the benefit of the lower interest rates associated with loans backed by collateral.
-
1
