Receiving approval for the cheapest APR loans means that less interest will be paid over the full lending term. Despite low central bank base rates, the cost of borrowing has actually risen over the last couple of years. Whilst rising unemployment has meant that many lenders have withdrawn their loan and credit card products, the remainder will only lend money to customers with very good credit scores because they are less likely to default on their agreement.
Lowest Rate Loans for Good Credit Risk Customers
Lenders use a process known as credit scoring to ascertain the likelihood of the borrower defaulting. A good credit score rating means that the applicant represents a far lower lending risk. Not only is that person more likely to receive approval for all forms of credit, they will also qualify for the lowest rate loans from banks and peer-to-peer lenders. Once unemployment drops to a more sustainable level, the rate of interest will fall to a more realistic level.
Lowest APR Loans from Peer-to-Peer Lenders
Peer-to-peer simply means that people lend money to people in an environment that is based around the concept of an online auction. Whilst Zopa.com (UK and USA) and Prosper.com (USA) used to deal with higher risk customers, this is no longer the case as they represent too great a risk in the current economic climate. Only those who have built good credit ratings will be eligible for affordable loans.
- Zopa.com. Customers are categorised as A*, A, B, C or young market . A cheap rate loan for an A* category customer is currently just 10%, whereas a category C customer will pay 13.8%. Although flexible loans for good credit scores from Zopa are available for up to 60 months, they can be repaid - without penalty - at any time.
- Prosper.com. Applicants are categorised as excellent (760), good (700) and fair (640). A listing is created detailing that person's history and why they need to borrow money. Lenders bid against each other to spread risk and ensure a competitive rate of interest. Fixed rate, unsecured low APR loans are available from just 7.5%. The borrowing term is a maximum of 3 years.
Pay Less Interest with a Cheap Rate Loan from a Bank
The lowest rate loans from banks will only be offered to the best customers. Whilst a good credit score is an excellent starting point, banks are looking to lend money to individuals who are most likely to be interested in other financial products (mortgages, credit cards and added value bank accounts). With so many different loans for good credit currently available, a walk down the high street is unlikely to be sufficient. A price comparison site, such as moneysupermarket.com, can be used to trawl the market in order to pinpoint the lowest APR loans from the multitude of different banks.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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