When it comes to erasing debt, one of the fastest ways to get rid of the credit cards and other charge accounts is to secure a low APR personal loan. By paying a smaller amount of interest on the debts owed, one can save years worth of monthly payments.
However, low APR loans can be tough to acquire if the person seeking them has below average credit. Here are some suggestions on how someone can secure or improve their chances to secure a low interest personal loan.
Use Spare Savings Accounts to Pay Down Debt
One of the things that adversely effects a credit score is a high percentage of debt to available credit. If there is extra money in a savings account that is not needed should an emergency arise, then pay that money to the credit card with the highest APR. If the payment makes a dent into the overall debt, then it may be reflected in the credit score the following month.
Obtain a Free Credit Report and Fix Errors
Each person is entitled to one free credit report from each of the 3 major credit reporting agencies once a year. Take advantage of this and clean up an errors or omission which may be negatively effecting a credit score. Common mistakes include accounts with multiple signatories that should only be in one person’s name (such as after a divorce or an old student credit card) as well as accounts which have negative blemishes that have run their statute of limitations.
Apply for a Low APR Personal Loan from a Credit Union
Traditionally, credit unions offer lower interest rates than their credit card counterparts. Seek out a credit union which offers loan services for the field in which the borrower is employed and apply for a loan. They will mostly likely pull the potential borrower’s credit as well as ask for recent tax returns and employment information.
Obtain a Secured Loan
A secured loan is a loan in which the borrower stakes collateral in return for the money they need. Many credit unions offer partial secured loans where the borrower stakes 20 to 30 percent of the money in cash to obtain the lower APR. The cash the borrower stakes is a security deposit against defaulted payments by the borrower.
Peer to Peer Lending Sites
Another popular option for people with decent credit is to obtain a person to person loan. This type of loan is exactly as it sounds where the borrower obtains the money needed from other people. Peer to Peer lending sites have gained in popularity because they can offer a lower interest rate than many credit card accounts. Also there is usually a fixed timeline associated with these loans, meaning the borrower must pay it back over 3 years or so.