As the caption itself indicates, low interest rate loans are the loans offered by finance companies/lenders to borrowers for various purposes at low rate of interest.
Broadly, there are two types of loan-Secured loans and unsecured Loans. Secured loans are those, which require you to offer the lender any of your assets, most commonly a house, as collateral. For lenders, this collateral serves as a security against defaults in payments by the borrower. If you, as a borrower, do not pay back the money borrowed by you to the lender, lenders have the power and authority to encash the collateral to recover their payments. Therefore, such loans are called secured loans. Contrary to secured loans, to avail unsecured loan, borrowers do not need to offer any collateral. Therefore, the lenders have more risk in unsecured loans than in secured. To compensate the increased risk in case of unsecured loan, lenders charge higher rate of interest in such loans. Where in case of secured loans, lenders charge low rate of interest due to low risk element.
Now-a-day, financing companies have started low interest rate loans in case of unsecured loans also, which effectively means, between the two lenders one may offer a lower rate of interest than the other. The lower rate of interest in case of the first lender makes the loan cheaper than the loan offered by the second lender.
Low interest rate loans are available in most of the types of loans such as secured and unsecured home loan, auto loan, personal loan etc among others. However, to borrow a low interest rate loan, borrowers need to fulfill certain criteria, some of which are:
I. Offer collateral as security in case of secured loan.
II. Should be in service or self-employed
III. Must be living in the current house for more than a year.
IV. Should have a clean bank statement.
V. Should have good credit score.
VI. Should not be a defaulter previously.
VII. Any proof of successfully closing any loan previously. This adds the most in borrowerâ€™s profile, which results in lower interest rate.
VIII. Two references.
Lenders request for the above criteria to establish the credibility of the borrower and so the risk associated with the loan offered to you. In case of low risk, lenders always charge low interest rate.
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