How to avail a low-interest personal loans in the UK?

With the current financial situation, availing a low-interest personal loans in the UK has become very easy. Lenders offer magnetic interest rates to attract the borrowers towards them. There are things that you should be doing to avail loans at shallow interest rates. Let’s discuss them in detail.

1. Research: The emphasis on research is due to the value it holds while availing a low-interest loan. You must educate yourself about how a loan works and what are the loan options that are at your disposal. You can know about the options only if you search for them. For mortgage alone, there are over 200 lenders. Apart from this, there are banks and other credit unions. So, now you have an idea of how many lending options are at your disposal. Of course, reading about them is a time-consuming task, but a little investment of time will fetch you benefits for a lifetime. So, read about every lender’s policy and interest rates they offer and learn if they offer a manageable repayment option. After learning about every lender’s policy, it will easy for you to choose your lender that will fit your bill.

2. Credit report: Having a good credit report is guaranteed to get you a low-interest rate loan. The reason why a bad credit score fetches the borrower a high-interest rate is that the creditworthiness of the borrower is too low that they can be trusted. Your credit score will be in favour or against you, depending on what you’ve done with it. You can take certain measures to improve your credit score if you’re a victim of bad credit score. The first thing you need to do is avail of a loan to start improving it. Once you’ve availed a loan, it’s time to use it, but along with that, you’re supposed to repay it. Your credit score will start improving if you’re consistent in repaying the loan EMIs on time. Try to avoid parallel loans and even if you have parallel loans, repay them without fail. Because when you repay your loan EMIs on time, your credit score improves by 35%. A credit score is calculated based on the following parameters:

1. Payment History holds the greatest weight, i.e. 35%. It tells the lenders how effective you’ve been in paying your EMIs. If you have a good history of paying your debts, then you’ll have a good credit score.

2. Current debt holds the next big place, by 30%. If you have any current debt, then it’s reflected here.

3. The length of credit holds a place value of 15%. If you’re a rookie or an old-timer, it’s shown here.

4. New credit comprises about 10%. Your most recent loan application contributes here.

5. Credit Type sums up to 10%. Your secured and unsecured loan contributes here.

Now that you know how your credit score is calculated and what composition plays the most vital role in building up your credit, it will be easier to rebuild your credit score.

1. EMI: People have a misconception that smaller EMIs paid for either short or long duration is less as a whole. But the truth is smaller EMIs paid for longer duration is more as a whole compared to larger EMIs paid for a shorter duration. When you choose the minimum EMI option, the EMI principal is, of course, small and looks easy to pay every month but you’re paying more in interest. It's advised to calculate your EMIs before choosing the most suitable choice for yourself.
2. Loan tenure: It is observed that most people choose a longer loan tenure while repaying their loan. Choosing a longer loan tenure implies smaller EMIs which in turn means repaying more in interest. Rather than choosing a longer tenure loan, choose a tenure that will make you pay less in the overall interest. Always calculate total interest payable while choosing the loan tenure.
3. Collateral: Pledging collateral while availing a loan can bring your loan interest down by 5-6%. That’s a huge drop. You’re getting to save a lot in interest, and it can fasten your loan approval process.

Pledging collateral while availing a loan can bring your loan interest down by 5-6%. That’s a huge drop. You’re getting to save a lot in interest, and it can fasten your loan approval process.