How to Get Approval for a Low Cost Loan

Despite falling interest rates, the cost of borrowing has risen in recent years. The APR that lenders charge currently has more to do with the risk of the borrower defaulting than where central banks set their base rates. Not surprisingly, low cost loans will only be available to customers who are best placed to repay their debts in full and on time. A low interest rate loan will help a customer to save money, leaving more disposable income for other household bills and expenses.

Credit Scoring and Low Cost Loans

Whilst financial institutions have always used credit scoring to determine risk, lenders no longer simply approve or reject customers. Whilst a bad credit history will lead to rejection for an unsecured personal loan, those with minor transgressions may receive approval at a slightly higher APR. Tiered lending allows lenders to manage risk more effectively, but this also means that only the most reliable payers will qualify for the cheapest loan rates.

Cheap Bank Loans Require Excellent Credit

Approval for a low interest rate loan used to be straight-forward, but this is no longer the case. Lenders are increasingly rejecting applicants that would have once qualified. This is because past credit transgressions are no longer deemed an acceptable risk, especially for unsecured low APR loans. Any missed and late payments will be reported to Experian, Equifax and TransUnion (credit reference agencies) and this makes the process of borrowing money far more difficult.

Improve Credit to Get Approval for a Low APR Loan

Past credit indiscretions will typically show on a personal credit report for 7 years in the U.S. and 6 years in the UK. Repairing credit isn’t a process that happens over night, but paying back any money owed punctually now and in the future will help to improve credit. Consumers should also get hold of a copy of their credit report and check this for errors. Provided the appropriate supporting information is provided, it is possible to get any inaccurate information corrected under the Fair Credit Reporting Act.

Why Lenders Offer Affordable Loans

In order to get approval for a low cost loan it is necessary to prove that default is very unlikely. This means that the borrower should be in stable employment, have a low income to debt ratio and have a good credit rating. Don’t make too many applications for credit (low APR loans, mortgages or credit cards) in a short timeframe as this will be construed negatively by lenders. Those who want to enjoy the cheapest loan rate should always perform sufficient research prior to making their application.