The last ten years have been very kind to borrowers. For years, interest rates remained low, and continue to fall, even as the economy expands. It’s quite remarkable actually and shows that we’re living through new and weird times.
Even so, the cost of borrowing for some people is still high.
Why?
Almost always, it comes down to credit score. Those who have had trouble repaying loans and debts in the past often wind up paying much more to take out money. Interest rates are higher and, sometimes, banks and building societies won’t lend at all.
The good news, though, is that slashing the amount that it costs to borrow money is actually a lot easier than you think. Here are some strategies that you should use.
Take Out Small Contracts
Taking out small contracts on things that require you to pay the money back over several months is a great way to instantly fire up your credit score and enable you to take out more money.
Here’s what to do. Find a relatively cheap contract deal on something – perhaps a new smartphone. Then consistently pay the operator the amount on the bill every month. Over time, making consistent payments will boost your creditworthiness, allowing you to reduce your interest payments when you want to borrow for something big – like a house.
Go To The Professionals
You don’t have to do all of this yourself, by the way. Credit repair companies help millions of people sort out their finances every year.
Interestingly, improving your finances isn’t the only thing that they do. They also scan your credit reports for potential sources of error – things that are unnecessarily hampering your ability to take out a loan. Often a few simple corrections to your record is all you need to get lower prices on financial products.
What’s more, people who use these agencies also get professional advice on the smartest and quickest way of boosting their scores. They provide you with insight into what strategy you should use first if you need a loan fast.
Clear Your Expensive Debt First
Mortgage lenders will often take into account the nature and the amount of money you owe to third-party creditors when deciding how much interest you should pay. If you owe thousands of dollars in personal loans, then that will count against you enormously when trying to get a mortgage.
Unfortunately, there are no easy answers here. Your best bet is to do whatever you can to reduce these payments, even if it means forgoing holidays or working on the weekend. It’s tough medicine, but over time, it works.
Slashing the cost of borrowing is actually easier than you think. Thanks to low-interest rates across the board, the average person now spends far less of their income on interest payments than in the past. For homeowners or people trying to take out credit, this fact is one of the saving graces of the financial crisis. Interest rates went down, and they stayed down, transferring more money to borrowers.