Lenders only offer the cheapest loan rates to the best customers. This means that the applicant will need excellent credit, a low income to debt ratio and a stable job. In the current financial climate, uncertainty will lead to a low APR loan rejection. Banks are seeking to avoid bad debt and protect their balance sheets. Until unemployment returns to a more sustainable level, the lending terms will remain stringent. A number of lenders have temporarily withdrawn from the market.
Low Interest Rate Loans Require Excellent Credit
A financial institution will use credit scoring to determine the likelihood of the borrower defaulting. Lenders will report to credit reference agencies regarding whether payment has been received punctually. Missed and late payments will cause a credit score to go down and make borrowing more difficult. An unsecured low cost loan will only be offered to customers with a good credit rating.
Correct Credit Report Errors to Get a Cheap Bank Loan
A surprising number of credit reports contain inaccurate information. When the lender performs its checks, it isn’t able to tell the difference between bad data and bad credit. The onus is on the individual to get hold of a free credit report check for errors and get these corrected. The Fair Credit Reporting Act gives that person the right to correct any issues personally or with the assistance of a credit repair attorney.
A Stable Job for the Cheapest Loan Rate
Lenders will offer a cheap bank loan to customers who are in stable employment. The longer that person has been in the same job, the better. If still in a probationary period, wait until the position becomes permanent. If in a temporary or contracting position, look for something more stable. Any element of uncertainty will lead to rejection for a low APR loan.
A Low Income to Debt Ratio for a Low Cost Loan
Whilst most people have other loans, mortgages and credit card agreements, too much debt will be perceived as a bad thing. An income to debt ratio of upwards of 36% will almost always lead to rejection for a low APR loan. This is because a high level of debt relative to personal income increases the likelihood of the borrower defaulting. This is because that person has a reduced ability to cope financially in the event of a change of personal circumstances.
Secured vs Unsecured Low Interest Rate Loans
Those who don’t qualify may be able to get a secured loan as the lenders financial interests are protected by collateral. Although it is possible to borrow more and/or extend the borrowing term, defaulting on the agreement could lead to home foreclosure. It is sensible to apply for unsecured low APR loans and only borrow money that is secured on a property when it is absolutely essential.