How to find the lowest rates on personal loans

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Here are the things you should do before agreeing to a personal loan, according to https://www.nerdwallet.com.

See if you qualify for a zero per cent credit card. If you have good credit, you can probably get a credit card that has zero per cent interest on purchases for a year or longer, and that may be less expensive than taking out a personal loan.

Consider a secured loan instead. If you have a house, consider using it as collateral in order to get lower rates. A home equity loan or home equity line of credit can often be cheaper than an unsecured personal loan. Keep in mind that using your home as collateral means that if you default, you can lose your home.

Pay off as much of your credit card balance as you can before you apply. The outstanding balance on your credit card, even if you pay it off at the end of the month and never pay interest, counts against you when a lender runs a credit check.

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Shop around. Your local bank or credit union may have great rates, especially if you have a long relationship.

What to watch out for with personal loans:

If you ignore the fine print in your personal loan agreement, you can find out the hard way that you agreed to less-than-desirable terms. Look for these facts before signing your contract:

Prepayment penalties: Most online lenders do not charge a fee for paying off the loan before a certain date, called prepayment penalties or exit fees. But just to be sure, always look for the words “no prepayment penalty” on your loan terms when you apply.

Accidental overdrafts: Many online lenders ask for automatic withdrawals from your current account, or offer a lower APR for choosing this option instead of paying by cheque. If you link your loan to your current account for automatic payments, you may be in danger of overdrawing your account and paying an overdraft fee.

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