Personal Loan Interest Rates Explained
Posted on October 26, 2021 at 5:10 pm | Uncategorized
When you’re looking for personal loans in Columbia, South Carolina one of your biggest concerns may be interest rates. Different finance companies in Columbia, South Carolina will have varying starting points for their personal loan interest rates. Interest rates can also be structured differently from business to business. Today, we’ll explain how finance companies such as Blazer Financial Services determine and use interest rates-in simple terms.
What Are Personal Loan Interest Rates, Exactly?
Most consumers who’ve taken out personal loans know that interest rates make an impact on their total of payments and loan payment amount. What exactly are these charges, and why must consumers pay them?
Investopedia defines personal loan interest rates as “a charge to the borrower for the use of an asset.” In this case, the asset is the cash that the finance company is extending to their customer.
Personal loan companies pay interest on the capital that they use to fund the loans they provide for their customers. Although most people hate paying interest on a loan, interest charges allow the lender to continue helping consumers in need. They also offer a layer of protection to the company for the risk involved in lending cash to a consumer.
How Are Interest Rates Determined?
Every business offering personal loans in Columbia, South Carolina has a minimum and maximum interest rate that they file with the South Carolina Department of Consumer Affairs. This maximum rate schedule is required by law to be posted in a conspicuous place within the office. Your interest rate at a finance company will never be above or below the rates listed on the company’s maximum rate schedule.
Many consumers aren’t entirely sure how lenders determine what their interest rate will be on a personal loan. There are several factors that come into play when assigning an interest rate to a consumer’s personal loan.
The largest factors that determine a consumer’s interest rate are their credit worthiness and ability to repay. This information is found within the customer’s credit bureau report and their debt to income ratio. In general, the worse a consumer’s credit (and the higher their debt ratio) is, the higher their interest rate will be. Why? Simply put, in general these consumers present more of a risk to the lender in terms of repayment than someone with excellent credit.
Does less than perfect credit mean you’re doomed to pay a large interest rate on personal loans forever? Absolutely not! Establishing a good relationship with a finance company by making consistently on-time payments can enable lenders to offer you a better interest rate on your next loan. At Blazer Financial Services, we make forming relationships with our customers a priority.
How Can I Pay Less Interest on My Personal Loan?
No matter what your interest rate is, there are steps you can take to reduce the amount of interest you pay on your personal loan. The best way to reduce the amount of interest you pay on a personal loan is to pay the loan off faster than your scheduled loan term. You can do this by making payments that are larger than the contracted payment amount, or making a separate larger payment from time to time if you experience a windfall.
The key to making this work for you is to CONTINUE MAKING MONTHLY PAYMENTS, even when your larger payments have “pre-paid” your loan. Although your next payment may not “technically” be due for another 6 months due to your efforts to pay down the balance, do not simply wait until the next due date to pay. This will negate the work you’ve done in reducing the amount of interest you pay on your personal loan.
Honesty & Integrity-The Blazer Financial Services Difference
We know that many personal loan lenders may not be up-front about the in’s and out’s of interest rates on their personal loans. At Blazer Financial Services, we pride ourselves on doing what’s best for our customer-not what solely benefits us as a business. If at any time during your personal loan journey with us you have questions, please feel free to reach out to Lisa or Jessica. We’re here to help provide you with the answers you need to fit your unique situation and budget.
If you’d like to experience personal loans done differently in Columbia, South Carolina, we invite you to visit our website for more information and to contact us. We’d love to make you part of our “family!”
-Lisa and Jessica O’Connor