Loan interest rates are something you cannot avoid. If you need to borrow money, you will definitely be paying interest. This is how lenders make their money and stay in business.
But just because you have to pay interest doesn’t mean you should settle for high interest rates. Always shop around and compare the rates between lenders, but don’t stop there! You need to do everything you can to keep your loan interest rates as low as possible.
Why are Loan Interest Rates So High?
Interest rates vary greatly depending on what kind of lender you are using.
When borrowing from a bank or a credit union, you will receive the lowest APR and the longest repayment terms. This comes along with a sluggish application process, long wait times, and a lot of paperwork. If you have the time and the patience, this route will get you the most favorable rates.
For private lenders the process is quicker, the paperwork is easier, and the wait times are nonexistent. You can literally apply in minutes, and have your funds within one day.
The price paid for this speed and convenience is a higher rate of interest.
But there is a wait to make it work for you, and chop that APR rate down a lot lower.
How to Beat High Loan Interest Rates
The amount of money you pay in interest is determined by two factors:
- How much money you borrowed
- How long you have that money
So the first step to beating the high cost of interest is to borrow the smallest amount you can to meet your needs. If you only need $200, don’t borrow $500! It will just cost you more in the long run.
The second step is to repay that money as fast as you can! You hear some pretty frightening interest rates for some lenders, but keep in mind those numbers apply for people that have money borrowed for months or years.
Instead, borrow the money for days, or just a couple of weeks. Fast repayment can reduce your overall interest costs by hundreds of dollars!
Be Careful! What to Watch For
This strategy does NOT work with all lenders. Many private lenders sneak something called “prepayment penalties” into the fine print of your loan contract.
What this means is that any attempt to pay your loan off early will result in fees and surcharges being added to your balance. These lenders do not want you to pay your loan off early, they will force you to stick to their payment schedule.
Before you do business with any lender, make sure they do not use prepayment penalties. This will end up costing you money, maybe a whole lot of money!
National Small Loan does not use prepayment penalties. We treat our clients with respect, and you should not settle for anything less.