1. Interest rates for auto and mortgage loans are at unprecedented lows thanks to the Federal
Reserve’s monetary policy. Since early 2016, the average rate for a fixed mortgage has decreased
from 4.01 to 3.62 percent. Additionally, five-year auto loans have average rates as low as 4.29
percent according to Bankrate.com. If you want to take advantage of the best deals in the market,
here’s how you can secure a good loan on your own.
Start by checking your FICO score
To secure a loan, you need what’s called a FICO score, which measures your likelihood of
paying back your loans on time. Lenders use your score in determining what your interest rate on
a loan will be and how much you can borrow. Your FICO scores can come from three credit
bureau reporting companies: Experian, Equifax and TransUnion.
There are different FICO scores depending on what type of loan you apply for (like personal
loans or auto loans). FICO scores of 720 to 850 are prime rates, and what you should strive for to
secure the best deal. 690 to 719 won’t qualify you for the best rate, but loans are still plenty. If
you’re in the average credit risk of 630 to 689, the rates will be higher, but with enough income,
reasonable rates won’t be hard to come by.
Where to find a loan?
You can go to your local bank or credit union to sign loan paperwork. Depending on your length
of time with the bank, the likelihood of receiving a prime rate and desired loan amount is high.
Credit unions usually offer lower rates than the banks because of their not-for-profit status.
For prime customers, online lenders including Lending Club work by checking your credit and
giving you a quote. Approved loans are electronically sent your bank account within several
days.
What if you have no credit or bad credit?
For college students with no credit history, federal student loans require no credit checks and
help you build your credit. Filling out the FAFSA is where you begin if you are an American
citizen with provable financial need.
With bad credit, your options are limited, but if you're a homeowner, home equity loans use the
value of your home as collateral, allowing for consolidation of debt.
Conclusion
Having a good credit score helps you get the best loan terms, but loan solutions for lower tier
borrowers also exist. Always check with your local bank or credit union before exploring other
loan possibilities.