Getting Low Interest Loans

No one begins the search for loans with the intention of obtaining the highest rate possible. While getting the amount of money you need is of primary concern, finding low interest loans is a close second on the priority list. To ensure you get the best possible deal, there are steps you can follow to make this desire a possibility.

Know credit management guidelines

Although no one can give you the exact model of building and maintaining a perfect credit score because the major credit bureaus hold that secret close to the vest, you can follow a set of credit management guidelines that will help you get low interest loans when you need them. The basics include:

• Make your payments on time, every time
• Use no more than half of your total available credit
• Maintain a good mix of credit products, including mortgage, auto and credit cards
• Keep your credit accounts open when you pay off the balance to help your debt utilization ratio
• Focus on credit longevity by using the same credit card for a number of years
• Never apply for credit and store charge cards when you already have enough to meet your needs

Understand credit scoring

Credit bureaus use the FICO score, named for the Fair Isaac Corporation that developed the scoring model. FICO scores run from 300 to 850, with 850 being the best possible score. While the goal is to reach the illustrious perfect score, excellent credit is generally in the mid- to high-700s. Anything below 600 constitutes a poor credit score.

Understand your credit file

The information contained within the file is just as important as the score when qualifying for low interest loans. High and perfect credit rarely features blemishes of concern, but average credit does. Your lender will take interest in:

• The amount and age of repossessions or foreclosures
• Whether you consistently pay bills late
• Collection activity
• If the amount of available credit is proportionate with your income
• Defaulted student loans
• Number of recent credit inquiries

Keep in mind that even individuals with stellar credit scores can make mistakes when applying for low interest loans that hurt approval chances. If a lender sees a dozen recent inquiries, but cannot determine if you’re shopping rates or obtaining accounts, they may offer a higher rate on the assumption you’re going on a spending spree you might not be able to repay.