4 tips to getting the best interest rate on your loan

What can you do to ensure you get the best rate?

If you’re a savvy shopper you’ll be used to sticking to a budget and finding products and services that offer good value for money. When it comes to a loan applying these skills is even more important because you want to make sure you can afford the monthly repayments. So what can you do to ensure you get the best interest rate?

Tip 1: Do your homework

Recent research undertaken by BACB¹ shows that 31% of Brits believe they have to get a personal loan from the bank they have a current account with. But you don’t have to take out a loan with your current Bank. Instead, shop around and compare interest rates from a number of loan providers. You can do this online – all with a few clicks.

As well as looking at the APR rate, make sure you also look out for other charges such as set up charges and early repayment fees.

Tip 2: Switch to a lower rate loan

If you already have a loan and you find another one with a lower interest rate, remember that you can switch to a new loan provider at any time - but always check if any exit fees apply.

Tip 3: Check your credit rating

What’s your score? Credit ratings or credit scores are one of the factors used by lenders to gauge your ability to borrow money and manage debt. The better your credit score, the greater chance you have of being offered a low rate.

Tip 4: Apply for a loan you think you’ll be granted

This might sound simple but, applying and being refused for a number of loans could damage your credit rating because it could appear to signal problems with debt. Check that you meet any lending criteria before applying for a loan. If you don’t meet the criteria, consider whether you really want to apply.

You should be able to find lending criteria for any provider on their website. If you can’t see it you can ask for it to be provided.

A final pointer: Don’t rush when choosing a loan. Remember, it has to be right for you and your circumstances. Switch off the TV, curl up on the sofa and take your time to search for a loan with an interest rate that you can afford.

¹BACB commissioned ICM to survey 2,001 GB adults. Respondents were interviewed by ICM in an online survey between 5th-7th July 2015. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules.

This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. BACB accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another BACB page. All information in this post was correct at date of publication.