Ways to Save on Interest on Your Loans

If you are shopping for a loan, or you want to find lower interest rates on your current loans, you can use these strategies to help you save money on your loans. The lower your interest rate, the less you will spend on interest, but it can also affect the total payment amount and how long it takes you to pay off the loan. These loan strategies can work for most of the loans that you have.

Look at Credit Unions First

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Credit unions and small banks offer lower interest rates on loans when compared to larger banks. It may take some hunting but you may be able to lower your interest rate if you can qualify for a loan through your local credit union. In order to get a loan through a credit union, you will have to be a member of the credit union, which means you have to meet specific criteria like living in a specific location or working for a specific employer. 

Set Up an Automatic Payment

If you sign up for an automatic payment, you should be able to lower your interest rate. This works for personal loans, car loans and mortgages. Banks like this because they are more likely to be paid on time with the transfer and you do not need to worry about making your payment each month. Check to see if you qualify for this option with your current loans.

Open an Account at a New Bank

Some banks will offer lower mortgage rates or interest rates on car loans if you have a checking account with them. Switching banks can definitely be worth the savings, especially if you are looking at a large loan like your mortgage. With your mortgage, it can be beneficial to use a mortgage broker who can help you find the best terms for your mortgage loan overall.  

Consolidate Your Higher Interest Loans

If possible you can consolidate your higher interest loans, like your credit cards, to personal loans with a lower interest rate. These loans can allow you to pay off your debt faster since you are not paying as much in interest each month. It may be a good option as long as you follow two basic guidelines. First, you need to stop using your credit cards completely. There is no point in borrowing the money if you continue to go into debt each month. Second you need to avoid tying a debt consolidation loan to your home through a home equity line or a second mortgage. This put s your home at risk if you are not able to pay the debts in the future.  

Improve Your Credit Score

One of the best ways to get lower interest rates is to have an excellent credit score. There is not a quick fix that will magically raise your credit score overnight. It is important to handle your credit well from the beginning to get the bet interest rates. There are things you cn do to improve your credit score if it is not as high as you would like. The first step is to catch up on past due payments like utilities and credit cards. Another thing you can do is to lower the amount that you currently owe in credit. If you are using too much of your available credit, it can make your credit score drop. Additionally, you need to be careful about closing out your oldest credit card accounts since this can cause your score to drop as well. If you know you will be applying for a mortgage in the next year, you should put efforts into brining up your credit score before you apply for the loan.