When your friends heard that you are planning to take a personal loan, they advised you to look out for the best rate. Rate here refers to the rate of interest that is added on to the personal loan at the time of repayment. Before you commence on your journey towards finding personal loan best rates, let me remind you that the term best rate is as vague as the term best. What you as a borrower might believe as the best rate, may have a better competitor, i.e. a still lower and attractive rate. In that case, which rate shall wear the crown of the best rate? Certainly, not the one which you believed to be the best rate on personal loan.



The confusion over best rates for personal loan is the result of the following:

• Almost every personal loan provider claims to be offering the best rates on personal loans. Unless it is a responsible lender, it will take every care that borrower is not able to unearth the true information about the rate.

• Borrowers are unable to validate claims by a lender that they are offering the best rate. Being engaged in their work, the borrowers are not able to put more time to this activity. Accordingly, borrowers are not able to see through the best rate offer by the loan provider.

As times changed, borrowers have become more empowered. As for the times, when borrower believed all that was said to them by lenders, the borrower today questions every claim by the lender. For validating claims, borrowers will not have to put more efforts. Through simple tools like loan calculator, borrowers can recognise the lenders providing the least rates. If the lender/lenders who approach you with a personal loan offer, offer an equivalently low rate, then the offer can be accepted.

Shopping for best rate personal loans is no different from the shopping of day to commodities. As you allow sellers to compete with each other to attract you as a customer, so must one allow lenders to compete with each other. The number of personal loan lenders in the UK has increased and the competition among lenders can only result in benefits for the borrower. Borrowers will get to choose from a larger number of personal loans deals. The chances of getting a best rate personal loan are significantly improved if the purview of search is widened.

Widening the purview of lenders however does not guarantee best rate personal loan. Borrowers search needs to be more focussed in his search.

Best rates on personal loans are also dependant on the type and amount of collateral offered by borrowers. Secured personal loans for instance are able to gain better deal than an unsecured personal loan. A secured personal loan is one where the borrower offers lender the right over certain assets in exchange of the loan amount. Unsecured personal loans thus are available without any collateral. Lenders take into account the risk potential in a lending venture. If the borrower threatens to expose lenders to greater risk, the lenders will peg the interest rate at a higher figure. This happens in the case of unsecured personal loans. Since there is no collateral involved in the process, lenders find themselves in a fix whenever a default occurs. A lender of secured personal loan on the other hand will not have any such fears. Thus, he will lend even at a low rate of interest.

Credit history too has a major contribution towards the best rates for personal loans. The lenders, before approving any loan applicant, will like to see through his credit file. If the credit file has a large number of CCJs and IVAs, the borrower is considered less credible. While certain lenders deny personal loans to such borrowers, others lend to the bad credit borrowers with a higher rate of interest.

So, do bad credit borrowers not get best rate personal loan? No! Bad credit borrowers too get a best rate on personal loans. It is only that the contours of the best rate changes a bit for the bad credit borrower. This is only because of the subjectivity that best rates are associated with. So when you are searching for best rate on personal loan, do not go by the rate that your neighbour qualified for. You can qualify for a rate that is higher than the rate secured by your neighbour, or may be you get an even attractive rate of interest.