Whether you’re buying a home, car, RV, or recreational vehicle, applying for a loan can feel overwhelming. At some point, most of us will need to apply for a personal loan, so it’s important to approach the process with confidence. Rather than walking into a lender’s office unprepared, take time to organize your finances and educate yourself on how to get the best deal.
Here are some tips to help you secure the best loan with a low interest rate:
1. Improve Your Credit Score
Your credit score plays a key role in determining the loan terms you’ll receive. According to the Federal Housing Administration (FHA), a score of 580 or higher qualifies you for an FHA loan with a 3.5% down payment. For conventional loans, a score of 620 or higher is typically required.
Before applying for any loan, request a free credit report from AnnualCreditReport.com. Review it carefully for any inaccuracies or signs of identity theft. If you have a Mountain America loan or checking account, you can access your credit score for free anytime through our mobile app.
Here are some steps to improve your credit score:
- Keep credit card balances below 30% of your credit limit
- Pay bills on time
- Pay off overdue balances
- Reduce outstanding debt
- Keep old lines of credit open
- Maintain a mix of credit accounts
- Limit credit inquiries and avoid opening new accounts
2. Save for a Larger Down Payment
A larger down payment reduces the lender’s risk and can lead to better loan terms. Paying 10% or more on a conventional loan could increase your chances of qualifying for a lower interest rate. In addition, a larger down payment means you’ll need to borrow less money, resulting in lower monthly payments. You might also avoid paying private mortgage insurance (PMI), saving you money in the long run.
Use our financial calculators to estimate how your loan amount, interest rate, and down payment will impact your monthly payments.
3. Check for Rate Discounts
Before applying for a loan, compare offers from multiple lenders. Check their websites, call them for more details, or visit them in person to ask questions. Many lenders, including Mountain America, offer rate discounts for MyStyle® Checking account holders—up to 0.25% off home, auto, and RV loans. Some lenders also offer rate reductions for setting up automatic monthly payments.
4. Avoid Taking Out Additional Loans Before Closing
It’s tempting to make big purchases or take out additional loans before closing on your new loan, but this can hurt your credit score. Lenders typically perform a final credit check before closing to ensure your debt-to-income ratio hasn’t changed. Even something as seemingly harmless as financing furniture can derail your loan approval.
5. Stay Stable in Your Job
Lenders prefer borrowers with a steady employment history. A long-term, stable job shows that you’re financially reliable and able to make loan payments. If you change jobs during the loan application process, it could delay or jeopardize your approval—especially if your new job involves lower pay or fluctuating income (such as commissions or bonuses). If you’re planning to open a business, most lenders require at least two years of self-employment history before they’ll approve a loan.
If you do experience a job change or relocation, inform your lender as soon as possible. A job change in the same field with no pay cut typically won’t cause concern, but it’s always better to keep your lender in the loop.
6. Don’t Worry If Your Credit Score Isn’t Perfect
If your credit score is lower than you’d like, don’t despair. By following these strategies, you can gradually improve your credit and increase your chances of securing a loan with favorable terms. For more guidance, visit GreenPath Financial’s free online resources.
Your Ideal Loan Awaits at Mountain America
After reviewing these tips, we’re still feeling generous—we’ve got one more piece of advice: consider applying for your next loan with Mountain America. With a wide range of financing solutions and expert guidance, we’ll help you find the best loan terms for your dream home, car, RV, or anything else you need.