There’s nothing wrong with having to take out a loan. In fact, it can be a great way for entrepreneurs to acquire the money they need to get their business off the ground.

However, people tend to run into problems when they don’t properly budget for paying back the money they borrow. Sometimes, though, it’s not always entirely the borrower’s fault.

No matter how solid their repayment plan is, some people who take out a loan are crippled by sky-high interest rates.

This isn’t only true about large loans, either. Small loans can be as difficult to pay off as bigger loans if the interest rate is high enough.

Luckily, there is plenty that you can do in order to lower your interest rate. Let’s take a look.

Is paying off your small loans becoming too expensive? Use this guide to lower your interest rate.

Borrow for a Shorter Term

When you borrow money for a shorter period, the lender has to spend less time monitoring your payments and making sure you’re on track to repay all of your debt.

The lender will also get their money back (plus interest) earlier. Thus, they may be inclined to offer you a lower interest rate if you sign an agreement to pay back your small loan over six months as opposed to two years.

If you know that you may have difficulty paying off loans, a shorter loan term can help keep the total interest that you incur as low as possible.

Improve Your Credit Score

One of the factors that lenders use to decide the interest rate of a loan is how reliable the borrower seems.

If a potential borrower has a stellar credit score and a solid history of making payments on time, then there is no need to give them a high interest rate.

Conversely, people with low credit scores and spotty repayment history will find themselves with higher rates than their more responsible financial peers.

But, there’s good news! If your credit score is poor or on the lower end of the average range, you can work to improve it before seeking out a loan. This will ensure you pay a smaller total amount than you would otherwise.

It’s still possible to get a loan with bad credit, but it’s unlikely. Even if you do, you’re not going to like the interest rate that comes with it.

Choose a Variable Interest Rate

Most lenders offer borrowers the option to choose between either a fixed interest rate or a variable interest rate. As both names suggest, the titles have to do with whether or not the interest will change during the repayment period.

A fixed rate will remain the same for the entire duration that the borrower repays the loan. But, this type of interest rate tends to be on the higher side.

On the other hand, a fixed interest rate could potentially result in you paying less when all is said and done.

Inflation, supply and demand, and government regulation are all factors that influence standard interest rates.

By doing a bit of research, you’ll be able to determine whether interest rates are going to rise or fall in the near future with a fair bit of accuracy.

If interest rates appear to be on a downward trend, choosing a variable interest rate is the better of the two options because the rate is unlikely to rise throughout the duration of your loan repayment.

Browse Different Lenders

It’s very unlikely that you’ll ever have only one lender to choose from. Similar to dealing with any other professional service, you have the capability to shop around for a lender that’s right for you.

Even if two lenders are in close proximity to each other, the loan terms and interest rates can be drastically different.

Thus, you should always take the time to browse if you feel as though the interest rate a lender offers you will be an issue.

Sometimes, however, you may have to compromise. Lenders who offer lower interest rates may not offer the right small loans options for you. Be wary of this during your search.

Offer Collateral

As previously mentioned, one of the ways lenders determine interest rates is by assessing how much risk they’re taking by giving money to a specific borrower.

If a lender is not confident in your ability to repay the loan during the specified time period, you may want to offer collateral in order to sway their decision.

Collateral could include a wide range of assets that you have, such as your home, your car, or even investments that you have. Should you fail to repay your loan, the lender would have the legal right to take your collateral as a form of payment.

Due to this, you should never offer anything for collateral that you’re not prepared to lose.

If you do choose to put up something vital like a car or house, you need to be absolutely sure you can repay the loan.

Have a Friend or Family Member Cosign

If you’re having trouble managing your small loans due to the interest rates, consider having a friend or loved one cosign the loan agreement with you.

This process is similar to collateral in that it can cause a lender to have more trust in you if they were on the fence about whether or not you would be suitable for a loan.

However, you should understand that failure to repay the loan under the given terms can have detrimental effects on your cosigner. Credit score penalties, late fees, and even wage garnishment are all possible.

For the sake of the other individual and your relationship with them, never have someone cosign a loan (even small loans) if you are not prepared to pay them back in full plus interest.

How to Lower Small Loan Interest Rates

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Even Small Loans Can Be Difficult to Manage

But, reducing your interest rate as much as possible with the above tips will make sure they are easier to handle. And, you’ll keep your family and friends out of trouble, too.

Small loans can sometimes be a necessary part of life, but you should only take them out if you can repay them. Want to learn more about managing your finances? Check out our blog.

If you’re short on cash and need to make a payment urgently, have you considered short term cash advance loans to solve the problem?

This type of loan can allow you to get your hands on cash quickly and easily. And there are many reasons you might need to take out short term cash advance loans, from bills to babies.

In a financial pickle and wondering where to turn? You are not alone. Here are 7 common reasons why people look for simple, short term cash advance loans.

Here are 7 of the most common reasons people are on the lookout for these short term loans.

1. To Cover Urgent and Unexpected Bills

Sometimes, bills drop in on us unexpectedly. For example, perhaps you forgot about an upcoming car or personal loan payment.

When one of these bills lands on your doormat, it can be a rather unpleasant shock.

But short term cash advance loans can help you to clear up that forgotten bill quickly. You then have the freedom of paying off the money over the next few weeks, rather than suddenly and all at once.

These funds can also be used to bridge the gap between the bill’s due date and your payday. This will help to relieve the pressure on you.

2. After Being Made Redundant

If you’ve been made redundant, you are likely to be entitled to some form of redundancy pay.

But it can take a while for any settlement to come through from your ex-employer. This can be a stressful period, as you’re left without your normal support.

This type of loan can help to tide you over until you’ve been paid. This means you can handle essential expenses like food and heating while you’re looking for a new job.

This way, you won’t be struggling as much after receiving the bad news.

3. A New Arrival

Babies are a gift – but an expensive one. It’s sensible to budget for your new arrival.

However, many parents – particularly first-time parents – might not have thought about certain expenses when getting ready. Or, they might simply be so excited about a new baby that they overspend.

Short term cash advance loans can help you pay for everything your newborn needs if you’re short on cash yourself. For example, have you realised how fast they’ll get through clothes as they grow?

Or quite how much you’ll spend on nappies? And for particularly blessed parents – do you know the true cost of twins?

This can be very helpful if the baby has decided to arrive unexpectedly early.

4. A Bad Credit Score

Sometimes, banks won’t give loans out to people with bad credit scores. If you haven’t looked at your score for a while, a rejection like this can be a warning sign that your rating isn’t looking too good.

A poor credit score can be the result of missing or late payments, applying for or taking out too many loans, or filing for bankruptcy – among other reasons. You should check your credit report when you get a chance.

With short term cash advance loans, you’re borrowing a lot less money.

This means that the process is less strict. You can take out smaller amounts to see you through until your next payday. Plus, you can do all this without the formality of a bank loan.

However, these loans are not something to be used without some thought and care. You shouldn’t generally use them just because you fancy a night out.

5. Christmas or Easter

During seasonal events, it’s normal to want a bit of extra cash.

There are drinks with friends, presents to pay for, and other seasonal excesses. These loans can help you secure a little extra funding at an expensive time of year.

Particularly at Christmas, if you’re getting paid at the end of December you might have a shortfall of cash available before the 25th.

You don’t want to be seen as Scrooge this Christmas. However, picking up extra hours at work may simply not be possible.

A short term cash advance loans can help you to cover these seasonal costs. Plus, you can pay back the money in the new year.

6. You’ve Overdrawn

So, you’ve run out of funds in your bank account and have started borrowing from the bank through the same account.

This is called overdrawing, and it’s a dangerous trap to fall into. It means that you have a negative balance on your account.

Bank accounts can cost a lot when this happens. There can be all sorts of fees and interest charges.

Notice that you’ve dipped into the red? If so, then it may well be cheaper to consider alternative loans.

7. General Emergencies Around the Home

An unexpected emergency to do with your house can quickly run down your savings account. For example, you might need urgent repairs to the walls of your home. You might also need to have your roof fixed before winter.

You might not be able to get a bank to agree to lend money so quickly. However, short term cash advance loans might be a viable solution to your problem.

In our example, you could use a short term loan to pay your builders an advance for the job. That should keep them happy until the rest of the cash comes through from the bank.

You can add on a little to your bank loan to cover the extra cost of taking out the short term loan. This way, all of your debt is neatly consolidated in one place afterwards.

7 Common Reasons for Short Term Cash Advance Loans

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Looking for Short Term Cash Advance Loans?

There are loads of reasons why customers ask us to take out a loan, and we judge each application on its own merits.

We try to say ‘yes’ as much as possible.

When unexpected costs come up, sometimes you just need the cash. We believe in giving everyone a chance, regardless of their personal circumstances.

Here at Cigno Loans, we can lend you short term cash up to $1,000 to help you out before payday. We promise that we’ve made our service as quick and as easy for you as possible.

So get in touch to apply for a loan, or to ask us any questions about our loans. We’ll be there for you.