How to Get the Best Deal on a Personal Loan

When you need a personal loan for any reason whether secured or unsecured you want to get the money you need with the best possible deal. Here are some ways you can obtain the most favorable terms for your personal loan.

Know a little about the process- Sometimes the process granting of a loan can feel shrouded in mystery. Here are three things the underwriter considers when deciding whether or not to grant loan approval:

• Character- What kind of person are you? Have you maintained steady employment? Do you seem like a trustworthy soul?

• Capacity- How much debt can you take on? To discover this, your underwriter might consider your debt to income ratio. This ratio is calculated using the amount of debt you carry and your gross monthly income. For example, a 33% debt to income ratio is considered good for homebuyers.

• Credit- What’s you FICO (Credit) score? Anything over 650 will increase your chances of being approved.

In banker speak, this is called the “Three C’s”. It’s the basis for how the lender determines if you’ll get the loan or not. If you know these things, it can help you determine what kind of terms you can expect.

Comparison shop- Look at several loan companies to see what they’re offering. You may be surprised at how different that can be.

A good way to do this is to use the instant quote systems proliferating on the internet. You can have several companies bidding on your business and see the terms side by side.

Know the terms of the loan- Understand how the terms of the loan impact how much and for how long you’ll be paying the loan back.

• Interest Rate- Specifically the APR (Annual Percentage Rate). That’s more important than the interest rate. Even if the interest rates are the same, the APR’s can be different. It’s the best number to use because it tells you the interest rate you’ll be paying yearly. The lower the APR the better.

• Repayment Period- Know how the repayment period impacts your total cash outlay. If you shorten the payment period, your payments might be higher but the potential interest savings could be substantial.

Use an online calculator and plug in different repayment periods to see the bottom line results.

• Other Fees and Discounts- Many banks will cut a quarter of a point off the interest rate if you allow them to use your bank account for automatic monthly payments instead of you paying by check.

You know banks charge more interest and/or fees for late payments, but some also impose a penalty on early repayments.

Cultivate Your Credit Score- Make sure you know your credit score. Review the score from the three credit bureaus at least yearly. Ensure its accuracy and keep your score as high as possible. It’s probably the single most important factor in getting you the best deal on a personal loan.