Personal loans can be tremendously useful. Whether it’s to fund a family vacation, build a new garage, or start a new business, personal loans can be the shot in the arm that you need. Yet, if you’re not careful, you can wind up paying higher rates than what are absolutely necessary. If you simply accept the first offer you come across, the odds are it’s not going to be the best rate.

Fortunately, there are some things you can do to get better personal loan rates. A little bit of legwork in the beginning can save you a lot of money over the long run.
Here are some tips to keep in mind:

1 Shop around.

It should be obvious, but the fact of the matter is many people simply wander into their local financial institution and apply for a personal loan. They don’t compare rates and offers, and they often go in without even being aware of their own financial situation. More often than not, this leads to poorer loan rates and terms, sometimes significantly so.

2 Know your own financial situation

It’s a good idea to know where you stand before you start looking. Get a copy of your credit report (which you can get for free at the Annual Credit Report website) and consider paying for your credit score, as well. Knowing your score will help you leverage better rates.

3 Consider secured personal loans over unsecured personal loans

If you can qualify for an unsecured personal loan at all, understand that the rate is going to be significantly higher than a secured personal loan. Without a security, the lenders are at a greater risk and their personal loan rates reflect that risk.

4 Choose the type of secured personal loan that best fits your needs.

If you only need $1,000, you might be better off with a personal auto loan rather than a home equity loan. A home equity loan is probably more appropriate if you need a large amount of cash all at once. If you suspect that you’ll need several infusions of cash, a home equity line of credit might be the best option.

5 Don’t just look locally.

One of the biggest mistakes consumers make when shopping for personal loans is to stick with local institutions. While there may be some merit to supporting local businesses, the fact of the matter is that you may be able to get a significantly better rate if you look for Internet-based lenders.

10 Tips to Get Better Personal Loan Rates

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6 Pick a lender you can trust.

While there are laws in place that help protect consumers from predatory loan practices, the fact is that not all lenders are created equal. Some lenders use questionable policies, or offer loan terms that are disadvantageous. Check out some reviews of the lender before you choose them for your personal loan.

7 Borrow only what you need.

Let’s suppose you need a personal loan in the amount of $500. A particular lender might offer you a secured auto personal loan in the amount of $2,000. The extra cash can be tempting, but even with lower rates that higher principle amount is going to cost you more over time.

8 Once you’ve narrowed down your list of lenders, begin to negotiate.

Some lenders will be able to offer you more favorable rates and terms if you simply ask. Gather several offers, and then talk to each lender to see if there are any better rates available to you. Even a half a percentage point in interest will save you significantly over the life of the personal loan.

9 Consider all of the loan terms, not just the rate.

Some loans will have significant penalties for paying off the loan early, for example. Others may have a number of fees associated with the loan. Know what penalties you might face if you make a late payment, and what kinds of terms might kick in at any point. While these factors shouldn’t be your only concern, they should be taken into consideration.

10 Don’t get the loan sooner than you truly need it.

If you can wait, do so. If you can save up for a few months and it won’t affect your quality of life, do that instead. Much of what you’re paying for with a loan is the convenience of having the money today, as opposed to down the road.

You work hard for your money. Don’t throw it away on a personal loan that isn’t right for you. Be smart about choosing the loan and the lender, and you’ll save significantly in the end.

About the author: John Haller is the founder of Fidelity One Credit Corp, a socially responsible company offering auto secured credit cards, revolving lines of credit, and auto title loans. Fidelity One has been in the car title loans business since 1994 and is a Better Business Bureau registered company with the best rates nationwide.