The interest rate is a percentage fee of the total loan you take. It is usually calculated annually, which means that an interest rate of five percent means that you pay exactly five percent of the remaining loan amount annually. It is the interest rate that determines how expensive a loan becomes, which is why there is a constant struggle to find as low interest rates as possible. A low interest rate is usually equivalent to a cheap loan.
However, it is not just the interest rate that affects how expensive a loan is ultimately going to be. The interest rate is of course the big cost, but then you also have different fees that can be added. It can be a setup fee for the loan, a notification fee for when the lender sends out payment notifications and maybe some other fee depending on the terms.
Different types of low interest rate loans
The most common option when talking about a loan with a really low interest rate is a mortgage loan. It is probably the loan you can take that has the absolute best interest rate. The reason for this is that a mortgage loan has a good security in the form of the home you own or are about to buy. Thus, it is not as great a risk for the bank to lend to you.
Another type of loan that often has a fairly good interest rate is a private loan. This is a secured loan where you can use the money for anything. There are different types of private loans from a number of different lenders and some of them do not have the worst interest rates. However, if you choose a slightly larger private loan from one of the slightly larger ordinary lenders, you can get a loan with a low interest rate.
Credit card as an alternative
A credit card can be traded on credit, which is basically the same as using money you do not have yourself. So the question is about a loan in much the same way as when you take a regular loan. If you are looking for a loan with a low interest rate, it may be an alternative to use a good credit card instead, at least if you do not need an overly large loan.
Many credit cards have up to about 60 days interest-free when trading with the card. This means that if you need money to buy a new TV for say USD 10,000, you can buy it on your credit card and use the credit. The condition is, of course, that you have a credit limit higher than USD 10,000 so that you can pay for the TV with your credit card.
You then have no interest on this money if you repay the amount within about 60 days (exactly how many days vary depending on when in the month you use the credit as it is usually the case that you receive an invoice at the end of each month). If you can repay the entire amount in time, you completely avoid the interest rate, but otherwise it can be a somewhat unnecessarily high interest rate, so if you test this method, make sure you have all the money until this deadline expires.
How to find a low interest rate loan?
Of course, you must start by deciding what type of loan you want to take. You can take out a mortgage if you are considering buying a home or if you own a home that is not fully mortgaged today. In such cases, you can come down to very low interest rates (currently, September 2014, you may receive interest rates below two percent). If you intend to use the money for something else of your choice, you need to find a private loan instead.
Many banks and lenders offer private loans with good interest rates. It is required that you meet their basic requirements regarding your finances, such as income and debt and that you can manage a credit report etc. If you can borrow from any of the slightly larger lenders, you can get clearly approved interest rates, especially if you borrow for a little longer.