Whether you want to finance the cost of a large purchase, consolidate debt, or pay for unexpected expenses, a credit union loan is a fantastic option for your financial needs. When you take out a loan, the interest rate influences the total cost of the loan.
The loan's interest rate is the cost of borrowing money. A lower interest rate is preferable, as it reduces your total loan costs and monthly payments. Here are some tips to help you obtain a lower interest rate.
1. Have Proof of Employment (or Steady Income)
Though it's possible to be approved for a loan without proof of income, you'll typically receive a lower interest rate if you can provide documentation that proves you have some source of regular income. If you're employed, bring your last few paycheck stubs and your most recent W2.
Or, if you're self-employed, bring your most recent 1099s, bank statements, and proof of payments from your customers or clients. It's a little harder to prove consistent income if you're self-employed, but ample documentation is usually sufficient.
If you don't work but have some source of regular income, bring bank statements for the account where you receive or deposit the payments.
2. Boost Your Credit Score
Your credit score is another component that influences your loan's interest rate. The higher your credit score, the lower your interest rate.
See that you're making all your loan and debt payments on time. If you have any credit cards or lines of credit that are maxed out, pay them down so that you're not using more than 30 percent of your available credit.
Look over your credit report for inaccurate information. Should you spot anything that's incorrect, dispute the information with the credit bureau.
Avoid applying for a large number of new loans. When you apply for a new loan or credit card, the lender usually performs a hard inquiry on your credit. A couple of hard inquiries will have minimal impact, but a lot of inquiries can lower your credit score.
3. See If the Credit Union Offers a Discount
Many credit unions have options that will lower your loan's interest rate. For example, if you have a checking or savings account with the credit union, you might be offered a lower interest rate due to your banking relationship.
Some institutions offer a lower interest rate to borrowers who are willing to sign up for electronic statements or have their monthly payments automatically drafted.
For more information, contact a credit union in your area.