First, decide for what purpose you require the loan.
The very first thing you should do is decide how much money you want to borrow and how long you’ll need to pay it back to get the best loan rate. This will allow you to compare like for like how much each different lenders would charge you for borrowing the same amount of money.
It would be also a wise choice to use a tool on a comparison site that will let you compare with different amounts of money and the time you need to repay the loan. Also generally, the longer you borrow money for, the more a loan will cost you in interest overall in the long term.
Evaluate your credit score and see if you can improve the same
It should be common knowledge that the higher your credit score, the better the chance you have of being offered a cheaper rate of interest on a loan. For getting the best loan rate, you could try to improve your credit score if possible before you try to apply for a loan.
Don’t apply for multiple loans at a time
If you’re looking for a loan, avoid applying for multiple loans at once since each time you apply to borrow money, a check is carried out on your credit report by a lender and those credit inquiries will leave a mark on your file. Thus if you make a lot of applications in a short term period it will likely damage your credit score and that will result in you being less likely to be offered the best loan rate. This is especially the case if the multiple applications are unsuccessful as this can further negatively impact your credit score overall. Make sure you know your credit score before you apply for a loan so you can get a better idea of how you may be perceived by a lender. Also, make sure to read the criteria carefully before applying or you might get instantly rejected.
Research and know all the facts
Each bank as well as private money lender will make a different decision when giving you a loan so try not to get carried away and take out the first loan you see and do some research as some will offer a much higher rate of interest than others, so it’s worth checking out more options available.
Also, remember that loans aren’t just about interest rates either. It’s great if you’re eligible for a loan with a low-interest rate, but it may be worth studying the other features of the loan as well. E.g. understand if there are any handling fees that you may have to pay? This would make certain loans rather expensive compared to others so it’s a good way to compare similar-sounding loans.
Consider if a loan is the cheapest way to borrow
Generally, the maximum amount you’re normally able to borrow with a personal loan is around R350,000. The maximum you can usually borrow on a credit card is typically much less. If you’re thinking of borrowing a smaller amount of money, it might be worth considering getting a credit card rather than a loan in that case.
The advantage of a credit card is that it gives you a little more flexibility than a loan you can borrow money as and when you want and you can pay it back as soon as you want. In contrast, a loan will give you a fixed sum of money, a set amount of interest to repay and most likely a repayment plan that you’re locked in to for a certain amount of time instead.
The other thing to bear in mind is that if you’re able to get a 0% interest offer on a new credit card which is an even cheaper way to borrow as it’s likely there’ll be little or no charge at all.
Borrowing more generally costs less
Moneylenders tend to charge different rates of interest depending on how much money you would borrow. Typically, the more money you borrow, the less interest you are being charged for. Often the amount of money you need to borrow to get a lower annual interest rate can be small. If you want to work out how to get the cheapest interest rate then it’s probably worth doing some calculations to work out the best amount to borrow.