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How To Get Approved For A Bad Credit Loan

Bad Credit Loans > Bad Credit Loan Articles > Article: How To Minimise Your Loan Costs With Bad Credit

Bad credit loans can be expensive. A borrower with less than perfect credit will have to pay higher interest rates on their loans. They may also have to deal with less favorable terms and conditions, and will face increased scrutiny during the application process. Still, borrowers with bad credit can minimize their loan costs through proper planning, preparation, and with a little bit of financial discipline. Below are several effective strategies for reducing your costs over the life of your loan.

Before You Take Out the Loan

1. Do your homework before signing on the dotted line.
Go online and research rates and offers prior to applying for any loan. Obviously, the interest rate on any loan is important; however, you should also examine every lender's loan terms and agreements. Does the lender charge a higher interest rate or fees for extending the loan term? What are the costs for a late payment? Are there early payback fees? Understand all of the terms and conditions before you take out any loan to avoid getting overcharged down the road.

2. Ask for a lower rate.
If you find two or more lenders willing to extend you financing offers, you may be able to negotiate a lower interest rate on your loan. For instance, if one lender offers a slightly higher interest rate but lower fees than another lender, you may be able to convince the first lender to lower their interest rate in order to earn your business. While not every lender will be open to negotiation, it's certainly worthwhile to ask!

After You Take Out the Loan

3. Pay more, more often.
Paying more toward each loan payment will save you money over the life of the loan. Any money you can apply above and beyond the minimum payment will help you reduce the amount of interest you owe and enable you to repay the debt more quickly. You can also make extra payments using any unexpected finances you earn throughout the course of the year. Apply income tax returns, gifts, or other bonuses to your loan to save money. Even one extra payment every year will make a huge difference in the total cost of the loan.

4. Make payments fortnightly.
Here's a great tip that doesn't cost you any extra money! By making payments every two weeks rather than once a month, you can cut the cost of your loan dramatically. Simply pay half of your payment every two weeks instead of the full amount once a month, or make 25 percent of your payment each week. Fortnightly payments add up to the savings of an extra month's payment every year! Just make sure you make the first half payment before the due date to avoid incurring any late charges!

5. Don't adjust your payments with interest rates.
If interest rates drop, don't decrease the amount of your variable rate loan payment. Many people make the mistake of adjusting their monthly payments when interest rates go down. Instead, keep paying the amount that you've budgeted and you'll pay off the loan much sooner - and pay less in interest over the life of the loan.

6. Consider refinancing.
If interest rates go way down, or your credit rating improves substantially, consider refinancing your loan with a different lender or consolidating the debt into another, lower-interest loan. However, you should carefully evaluate the costs of refinancing in order to ensure that you save money. Some lenders will charge you extra fees to refinance your home loan before the contract has been fulfilled.

7. Ask about on-time or early payment savings.
Some lenders offer a discount for payments made before or on the due date. Ask your lender if they offer any incentives for early or on-time payments. To double your savings, apply the money earned for paying on time to the principle.
Smart borrowers can dramatically decrease the cost of their bad credit loan and get out of debt faster by following these money-saving tips. Some strategies, such as making extra payments, require you to apply extra money toward the loan. However, you can also save money by making more frequent payments without spending any more cash. To achieve maximum savings, use a combination of the different strategies. No matter which methods you choose, being smart about your bad credit loan will reduce the amount of interest you pay over time and can cut years off the life of your debt.

What to do next

Finance Comparison lists a number of highly competitive bad credit loans that you can apply for online. Simply compare rates, terms and apply online.

 

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