Cheapest Unsecured Loans: Borrow Money at a Low Interest Rate

Jun 23, 2010
Asa Ghaffar

How to Get a Cheap Unsecured Loans - gilbien03

The cheapest unsecured loan rate leads to a lower cost of borrowing. Achieve a better credit report score and get approval for a low interest rate loans.

It won't come as a huge surprise to discover that the cheapest unsecured loans are offered to applicants who are in the best position to repay them. This type of low interest rate loan is provided without collateral so it can be difficult for the lender to recover its money if you default.

The lending criteria for low cost loans has been tightened in recent years, but building credit scores for a better report will increase the likelihood of approval. Not only that, a higher score will dramatically reduce the cost of borrowing money so you'll have to find less money each month.

Cheapest Unsecured Loans

Bank - The most popular way of borrowing money, especially for customers who have an established relationship with a lender. You may have been pre-approved, so check this out the next time that you access your online banking.
Peer-to-peer lender - People lend money to other people via an intermediary, such as Prosper.com, Zopa or the Lending Club. You'll still need a good credit history.
Family member - A popular choice when unemployed or you have a bad credit history.

Repair Credit Ratings

Check the information that's held by credit reference agencies for mistakes and get any errors corrected. Lenders don't know that the information isn't correct, so the onus is on you to resolve any problems prior to applying for a cheap unsecured loan.
Ensure that less than 30% of your credit limit for each credit or store card is used each month. Liz Pulliam-Weston, a financial expert for MSN Money, stated: "You typically can increase your scores by limiting your charges to 30% or less of a card's limit."
Don't close down credit and store cards, use them occasionally each month. Making a few purchases and settling the full balance can help you to achieve a higher score. Closing down unused accounts may lead to a credit score drop.
Avoid making too many applications for credit because each search will be visible to creditors for a period of 12 months. Use a comparison site, such as moneysupermarket.com, to pinpoint the best offers. Too many applications in a short timeframe can set of the alarm bells as it implies financial difficulties or potential fraud.
Use savings to pay down debt. Don't borrow too much money as the higher the applicant's income-to-debt ratio, the more expensive it will be for you.

All Americans have a legal entitlement to a totally free credit report every 12 months under the Fair and Accurate Credit Transactions Act. Order a copy of your report from each of the credit reference agencies, identify and correct errors and improve credit utilization in respect to revolving debt.