Best Ways to Get a Low-Interest Personal Loan & Save Money on Interest
Taking out a personal loan can be a great way to cover unexpected expenses, consolidate debt, or fund a major purchase. However, high-interest rates can make borrowing expensive. If you’re looking for ways to secure a low-interest personal loan, this guide will walk you through everything you need to know from credit score tips to choosing the right lender.
Why Interest Rates Matter in Personal Loans
The interest rate on your loan determines how much extra you’ll pay on top of the borrowed amount. For example, a $10,000 personal loan at 15% interest will cost significantly more in interest than the same loan at 6%. A lower interest rate means smaller monthly payments and less overall cost.
Steps to Get a Low-Interest Personal Loan
1. Check & Improve Your Credit Score
Your credit score is one of the most important factors in determining your loan’s interest rate. Lenders prefer borrowers with high credit scores because they pose less risk.
How to Improve Your Credit Score:
Pay bills on time
Reduce credit card balances
Avoid opening new credit accounts before applying for a loan
Check your credit report for errors and dispute inaccuracies
A credit score above 700 often qualifies for the lowest rates, while scores below 600 may result in high-interest loans or even loan rejection.
2. Compare Lenders & Loan Offers
Not all lenders offer the same interest rates. It’s important to compare loan offers from different sources, such as:
Traditional banks – May offer lower rates but stricter approval criteria
Credit unions – Often provide lower rates for members
Online lenders – Convenient and fast but may have higher rates
Peer-to-peer lending platforms – Alternative option with competitive rates
Use online tools like loan comparison websites to evaluate different lenders. Look at APR (Annual Percentage Rate), loan terms, and fees before making a decision.
3. Consider a Secured Loan
If you’re struggling to get a low-interest personal loan, offering collateral (such as a car or savings account) can help you secure a lower rate. These are known as secured personal loans, and they typically come with lower interest rates compared to unsecured loans.
However, the risk is that if you fail to repay, the lender can seize your collateral.
4. Opt for a Shorter Loan Term
Most personal loans offer terms ranging from 1 to 7 years. While a longer term results in lower monthly payments, it also increases the total interest paid. A shorter loan term means lower interest rates and faster repayment, which can save you money.
5. Apply with a Co-Signer
A co-signer with a strong credit profile can help you get a lower interest rate. Lenders consider the co-signer’s creditworthiness, which reduces their risk and may lead to better loan terms. However, the co-signer is legally responsible for repaying the loan if you default.
6. Improve Your Debt-to-Income Ratio (DTI)
Lenders assess your ability to repay the loan by looking at your debt-to-income ratio (DTI), which is the percentage of your income that goes toward paying debts.
To lower your DTI:
Pay off existing debts
Increase your income through a side job or gig work
Avoid taking on new credit obligations before applying for a loan
A DTI under 35% is ideal for securing the best loan rates.
7. Take Advantage of Special Offers & Discounts
Some lenders offer discounted interest rates for:
Automatic payments (0.25%–0.50% discount)
Being an existing customer of the bank
Military service members or veterans
Always ask your lender about possible discounts.
8. Avoid Predatory Lenders & High-Fee Loans
Be cautious of payday loans, high-fee installment loans, or loans with hidden charges. These often have excessively high interest rates (above 30%), which can trap you in a cycle of debt.
Stick with reputable lenders who disclose transparent loan terms and reasonable fees.
Frequently Asked Questions (FAQs)
1. What is considered a good interest rate for a personal loan?
A good interest rate is typically below 10% for borrowers with strong credit. Average personal loan rates range from 6% to 36%, depending on creditworthiness.
2. Can I get a low-interest personal loan with bad credit?
It’s possible but difficult. Consider improving your credit score, applying with a co-signer, or looking for lenders that specialize in bad-credit loans.
3. How long does it take to get a personal loan?
Most online lenders approve personal loans within 24–48 hours, while traditional banks may take a few days to a week.
4. Does applying for a personal loan hurt my credit score?
Yes, a hard inquiry can lower your score by a few points. However, multiple inquiries within 14–30 days for rate shopping are usually counted as one inquiry.
5. What fees should I watch out for when getting a personal loan?
Look out for:
Origination fees (1%–6% of loan amount)
Prepayment penalties (if you repay early)
Late payment fees
Choose lenders with low or no fees for the best deal.
6. What’s the best way to compare personal loan offers?
Use online loan comparison tools and check:
APR (interest rate + fees)
Loan terms (shorter is better for saving money)
Lender reputation and reviews
Final Thoughts: Get the Best Personal Loan Rate Today
Securing a low-interest personal loan requires a good credit score, smart lender comparisons, and financial planning. By following these steps—improving your credit, comparing offers, considering secured loans, and reducing your DTI—you can save thousands in interest payments.
Ready to Find the Best Personal Loan?
Compare top lenders today and get a low-interest loan that fits your financial goals. Click below to check your rates without affecting your credit score!
