No one was anticipating the rates on loans to come down, but we are seeing extremely low rates again. This is awesome news for those looking to buy on credit, but people who already have loans should also rejoice since there is now a good chance that you can refinance to save some money. After all, getting a good rate on your loan is one of the better ways to save money over time. A lower interest rate is vital if you want to save more money — especially on larger loans that span a longer period of time.
If you want the best possible loan, there are some tried and true tips. Michelle Dosher is the managing editor of the Home and Family Resource Center at the Credit Union National Association. She has 4 tips that will remind you to get back to basics as you attempt to get the best loan rate:
1. Know Your Credit Score
“Most lenders are going to assess not only the transaction you are seeking to finance, but also your history of creditworthiness,” says Dosher. “Be sure to keep track of any blemishes on your credit report, which can negatively impact the rates you receive for a loan.”
Dosher recommends checking your credit report regularly, including accessing your free report via AnnualCreditReport.com, each year. You can correct errors on your report, as well as identify problem areas that you can work so that you can bring your credit score higher, and qualify for better rates.
2. Shop Around
“It might seem obvious, but most consumers need to put in just as much detail to their search for financing options as they do for the item they are hoping to purchase,” says Dosher. “Check the terms and conditions of different lending options. Terms vary wildly, and paying close attention to detail will give you an accurate understanding of what rate you are really seeing.”
She also points out that you don’t have to finance your purchase at the same location that you make that purchase. You can shop around for pre-approval on a car loan, and secure a good rate from a lending institution, so that you don’t have to get dealer financing, which can sometimes be quite expensive.
3. Combine Options
Dosher says that some purchases lend themselves to a combination of options to help you get a low loan rate and take advantage of other favorable terms. “When purchasing a car, you can accept a rebate from a dealer, but also receive favorable financing from your local credit union,” she points out.
This also applies to certain purchases of appliances and electronics made with retailers. You can get a rebate or take advantage of a sale, while at the same time get the best possible financing elsewhere. See how you can mix and match terms to best advantage.
4. Make a Bigger Down Payment
“Like most financial offers, risk is going to be priced into the interest rate you receive,” Dosher points out. “So if you pay a higher down payment on a loan, you might be more likely to receive a more favorable interest rate as the lender has received a bigger payment up front.”
With a little planning and effort, it’s possible for you to get the best loan rate, and save thousands of dollars over the life of your loan.