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Monday, June 22, 2009

Understanding the Good and Bad About Low Interest Loans

Is it truly difficult to acquire low interest loans? The answer to this question will often be based on the actual finances of the individual that applies for the loan. However, anyone that makes a good candidate for a loan will surely be approved. After all, why would a lender deny someone who would make a good candidate for a loan? And, for that matter, what constitutes a good lender and why are low interest rate loans so preferable to higher rate loans? Here are the answers to those questions.

A low interest rate loan is one that would have an annual interest rate of 12% or less. Anything that rises above that amount could be considered a high - and in some cases - an unfair rate. The reason that it is important to acquire low interest rate loans is because the higher your interest payments, the harder it will be to pay off the balance that you owe. With high rates of interest, the ability to pay off the remaining debt becomes incredibly difficult.

When it comes to being approved to a lower rate of interest, there are a number of factors that go into determining the rate. The main factor would be whether or not the applicant has a good credit rating. Other factors that go into the decision to provide a lower rate of interest include how much income the person earns and whether or not the debt is secured or unsecured. Secured debt is back by collateral and an example of such a loan would be a home equity loan and this plays a role in lowering interest amounts.

But, are there any options for those that may have bad credit? The answer to this question is yes. It is possible to acquire a low interest rate loan or credit card even with bad credit. The reason is that there are multitudes of lenders in the country that have different business policies and standards of lending. As such, it may be possible for someone with less than desirable credit to be approved for a loan. In addition, the financial market is very competitive these days and many smaller lenders find that they need to be quite aggressive with their interest rates and programs to attract new business.

However, it is very important to read the fine print on any bad credit loan with low interest payments. This is because some (not all) of these types of loans can come with the proverbial string attached. For example, they may come with a low introductory rate that expands in time; a mandatory balloon payment at the end of a specified time frame; penalties for early payoffs; and basically any other term that could be slipped into the contract. The key to avoiding such unwelcome surprises is to read the contract from top to bottom and be sure that you are aware of everything in the fine print. This will eliminate problems based on a lack of clarity.

Low interest loans are not difficult to acquire if you have the appropriate credit history. However, if your credit history is less than adequate, there are still options available. But, those with low credit rating will need to be sure the deal they are accepting is truly to their benefit. This will avoid many potential problems in the future.


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