Ideal Loan Providers: Interest Rates and Fees

Finding a suitable loan lender can be challenging. There are a number of things to consider, such as whether the lender is responsible, the types of loan on offer, and the interest rate. For a lot of people, how much interest you’re charged is the most important factor when deciding on a lender. But what is a cheap interest rate, and should this be all that you look at when borrowing?

What is a Cheap Interest Rate?

Unfortunately there is no simple answer to this question. Depending on the type of loan you take out, you could expect to pay back almost twice what you borrowed, or practically no interest at all. 

As interest rates can hugely vary, it’s a good idea to use comparison sites or brokers to compare the rates available to you. These sites should be able to factor in your financial situation, such as your income and expenditure, and determine which lenders have comparatively low interest rates.

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When it comes to interest rates, the term ‘APR’ often crops up. While a lot of people know that this stands for ‘Annual Percentage Rate’, they may not think about what this means for short term loans.

An interest rate of over 1,000% APR sounds massive. But while a lot of short terms lenders charge higher interest rates, as they are aimed at people with poor credit scores, you won’t be paying back a thousand times what you borrowed. As APR is calculated annually, if you’re repaying over a few weeks or months, this figure won’t be accurate. 

For instance, if you’re looking to borrow $100 over two weeks, you’d probably only pay around $10 in interest. It’s also important to keep in mind that with short term loans, there is a cap on how much you can repay in total - you shouldn’t pay back more than twice what you borrowed. 

Key Information

  • When it comes to cheap interest rates, there is no easy calculation. Even the APR percentage doesn’t always clear things up completely
  • When taking out a loan, it’s important to consider any fees and charges that may be applied, in addition to the interest you’ll have to repay
  • The interest rate on a loan will depend on things such as the type of loan you’re taking out, your income and expenditure, and your credit score

Fees and Charges

Along with interest rates, you may also be charged fees. Often, short term lenders have a late payment fee - usually around $15, though you should only be charged this once. If any fees are applicable, the lender should tell you upfront, before you sign the loan agreement.

If you decide to use a broker when taking out a loan, you may also have to pay a fee for using their services. It’s important to check whether the broker will charge you before you complete the loan request. Find Me A Loan Today don’t charge our customers a fee - we instead work on a commission basis with our lenders. 

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Factors Impacting Interest Rates

While we all want to get the cheapest interest rates on a loan, the rate you get will depend on factors such as your credit score and what type of loan you’re requesting. We’ve listed the main three factors below:

Credit Score 

The biggest factor affecting your loan interest rate will be your credit score. As this score is an indicator of how well you manage your money, if you have a low credit score, you’re seen to be more of a risk to lenders. You’ll therefore probably be charged a higher interest rate. 

Your Income and Expenditure 

How much you earn and your monthly expenditure can make a difference on interest rates, particularly when it comes to a mortgage. Your income-to-debt ratio can show how much of a risk you represent to mortgage lenders, so the stronger the ratio, the lower your interest rate. 

Type of Loan

Some loans will have lower interest rates, regardless of your credit score. For instance, if you take out a secured loan, often called a homeowner loan, you’ll almost always get a better interest rate than on an unsecured loan. This is because there is less risk for the lender - if you’re unable to keep up with the repayments, the loan is secured against the value of your property. The lender can therefore repossess your home if you default on the loan.

Overall, it’s never as simple as just finding the lowest interest rate on a loan - there are a number of other things to consider as well. The easiest way to find a low rate is often using a broker service - they can do all the research and hard work for you.


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