Consider these tips to get a better rate when consolidating your debt with a loan:
- Shop around. Don’t just look at local banks. Online lenders can offer lower rates, faster application processing and even peer-to-peer lending opportunities. Don’t limit yourself to only the online world or companies with physical locations.
- Know your credit score and review your credit report. Generally, you need a credit score of 650 or higher to get a good deal on a loan. Check your credit report to make sure there aren’t errors that are hurting your credit score.
- Pay down your debt. Try to keep your debt-to-income ratio under 20% to get the best rates and terms. Lenders will generally not give out loans to borrowers who have a DTI of 43% or higher.
- Get preapproved. Preapproval allows you to see how much you can borrow and approximate your interest rate before committing to an offer. It’s also a good way to make sure you meet a lender’s eligibility requirements.
- Apply only for what you need. Asking for more than you need can land you with a higher APR and will increase the cost of your loan, since you’ll pay interest on the amount you borrow.