When you are considering applying for a loan, the interest rate plays a crucial role in deciding where you borrow from. Naturally, as a borrower, you want the interest rate to be as low as possible. Lower interest will ensure that you pay less money as interest and pay it back quicker. However, did you know that there are other ways to save interest on your loans as well? Here are a few popular ones:
- Set up Auto-Payment For Your Loan EMIs – The easiest way to lower your loan’s interest rates is to set up the auto-debit facility. You can do so while submitting the loan application. This works for almost all loan types like a new car loan, home loan, student loan, personal loan, etc. Banks usually charge a lower interest rate if the borrower signs up for auto-payment. This is because, with this facility, banks are confident that they are more likely to get the EMI paid on time.
- Maintain a Good Credit Score – One of the universal rules to lower your loan’s interest rates is to maintain a good credit score. To get the best interest rates, you need to have a good interest score right from the start. To maintain a good credit score, you need to pay off your credit card dues and lower the credit amount that you currently owe. What’s more, you also need to close all your old credit card accounts that are no longer operational, as they might negatively affect your credit score as well.
- Consolidate Your Loans – Another way to lower your interest rates when you have multiple loans is to consolidate all of them into one loan. This will not only fetch you a lower interest rate but will also make the payment method simpler. However, do take into note the fees, if any, which you might need to pay for the origination, transfer, etc. Consolidation loans can help a borrower save a lot of money, so spend some time to look for a good one that meets all your requirements.
- Switch Banks – Another effective way to save interest on your loans is to switch banks. Different banks offer different interest rates on various loans, and you might end up with a better interest rate for your loan with a new bank. And while you may be reluctant to go over the process of opening a fresh new account at another bank, remember, that it will help you save a lot of money in the long run.
- Check Out Credit Unions – As compared to banks, credit unions usually offer lower interest rates on loans. However, to qualify for loans, you will first need to be a member of the particular credit union. However, before you go ahead, take some time to conduct proper research. Find out the rates offered by different local banks and the rates provided by the various credit unions in your area. Find out the ones offering the lowest interest rate for the type of loan you are looking for and go ahead and apply in the same.
Do keep mind that these are just a few tips that can help you lower your loan’s interest rates. There are more strategies like quick repayment of the principal amount, paying frequent EMIs, etc. that can help you too. At the end of the day, make sure you are paying the least amount of interest as possible so that you can repay the loan back easily.