Getting a Good Loan Rate

These days getting approved for a loan is hard. Getting approved and getting a good interest rate is even harder. But, it’s not impossible.

If you want to get a good interest rate on a loan, the most important thing to have is a good credit score. Without a solid credit history, you can forget the competitive interest rates. These days, lenders are looking for credit scores of 720 or higher to give loan applicants a good rate. So before you fill out a loan application, check your credit score. That way, you’ll know whether you’re ok to apply for a loan, or if you need to do some work on your score.


For those who need some credit score work, one of the quickest ways to see a boost in your score is to dispute inaccurate items from your credit report. If your credit score is below 720, check your credit report to make sure there are no errors. If you do find a mistake, dispute it with all three credit bureaus to make sure your complete credit history is correct.

To look at all three of your credit reports, click here.

The other thing you’ll need to get a good interest rate is a verifiable income. The days of stated-income loans are long gone. With a stated-income loan, the lender would “take your word for it” so to speak in exchange for a higher interest rate. You got the loan without the trouble of proving your income. The bank got extra money. Everyone was happy. It doesn’t quite work like that. You need to be able to prove your income with recent paystubs, bank statements, and income tax returns. Some self-employed individuals who take large businesses deductions might have trouble even getting approved for a loan, much less get a good interest rate, even with good credit scores.

Finally, you’ll need to reduce your debt. Lenders want to see your debt-to-income ratio below 36%, even after you’ve taken on the new loan. You can calculate your debt-to-income ratio by dividing your total monthly income by your total monthly debt payments.