What's the cheapest way to borrow money?

At some point in life, you tend to borrow money. You may need it to buy a car or a house. Sometimes, you need to borrow money to meet unforeseen expenses. It is not always possible that you have enough savings to meet unexpected expenses, so you might have to borrow money in Ireland. While there are various lenders providing different kinds of loans, choosing the best option is the biggest challenge. Most of the people do not do proper research and end up with an expensive loan. Each loan is aimed at meeting different kinds of needs, so make sure that you choose the right type of deal. 

Loans are expensive. Whether you have to borrow a small amount of money or a large one, you will have to pay interest on top of that. The interest you pay includes fees and associated charges. Therefore, they are quite expensive. But it does not mean that you cannot find the most affordable loan.  

The cheapest way to borrow money depends on multiple factors, such as: 

• How much money do you borrow? 
• What do you need it for? 
• How long will it take to discharge it

The cheapest way to borrow money 

Here is how you can borrow money at the lowest possible interest rates: 

Research your options 

Most of the time, borrowers do not research their options as they need money urgently. For instance, if you need an instant injection of cash to have your laptop repaired that you use to do your office work, you will throw caution to the wind. You cannot waste your time researching your options because you need money urgently.  

Therefore, you will most likely find an expensive deal. Unfortunately, this scenario is observed when you need a large amount of money for your planned expenses, too. For instance, whether you have to borrow money to purchase a car or a house, you should carefully research the best rates. Unfortunately, many borrowers underestimate the importance of online research.  

Interest rates vary by lender because they are influenced by the risks associated with lending you money. When a lender believes that the default risk is too high, they will charge high interest rates. Another reason for varying interest rates includes fees and processing charges. By comparing interest rates and fees, you can easily pick the best lender. There are various comparison websites that allow you to gain insight into the rates that lenders charge.  

Saving is also an option when it comes to funding any expense. The larger the savings, the better. If your savings are not enough, make sure you borrow only to bridge the gap. Ideally, your savings should be worth at least three months of living expenses.

Pay attention to the repayment plan 

You should focus on the repayment plan too. The repayment length of a loan can increase or decrease the overall cost of the debt. If the loan term is short, you will pay less interest in comparison to those taken on with a large repayment term.  

Borrowers usually choose longer repayment plans because they reduce the size of the monthly instalment. They find it more manageable when they have to pay down a large amount of debt. As the size of the monthly instalment will be diminished, you can easily budget around payments. 

A short-term loan may be difficult to deal with because you have to pay down a large sum of money every month, but over time, you will save money on interest. The longer the repayment term, the more interest will accrue on the unpaid balance. So, when you have a chance to choose between repayment terms, you should never choose a long repayment term.

Check APR, not just interest rates 

Borrowers are suggested that they should focus on interest rates to choose the cheapest loan, but APR, also called annual percentage rates and interest rates are different. You do not pay just interest rates, but you have to pay fees and other charges. The APR includes interest rates, fees, and related charges. Whether you take out a loan for two weeks or for a full year, the interest you pay on top of the principal also includes fees. It means you are paying money as per the APR, not the interest rate.  

It is hard to determine how much you will be charged before applying for a loan, but you can get to know about fees and other charges. Most lenders disclose them on their websites. If the information is not given, you can ask your lender about this. However, the actual fees and interest are disclosed only after perusal of your credit report and income sources.  

Some websites could help you know estimated interest rates. These rates will help you know how much you would likely pay. For instance, if you need a loan without a guarantor, you can find out how much you would likely pay.

Borrow a small amount of money 

You should borrow a small amount of money in order to save your money in interest. Of course, if you borrow a small amount of money, you would be paying less interest. Borrowing a large amount of money increases the risk of default, and as a result, your lender would charge an even higher interest rate. It will make it complicated for you to repay the debt.  

Although small loans carry lower interest rates than large loans, it is still recommended that you carefully plan your repayment capacity. It is vital that you do not struggle to clear your debt.

The final word 

The cheapest way to borrow money is to research. Look for direct lenders who provide you with loans with affordable interest rates. Make sure that you borrow money at lower interest rates. Not all lenders charge lower interest rates. You should compare them. A golden rule of thumb says that you should carefully compare interest rates in order to get the cheapest loan. Check the APR because it includes fees and other charges. Above all, you should focus on your repayment capacity too.