There are many reasons you may need to borrow money. From tackling big home improvement projects to buying a vehicle to fixing a temporary cash-flow challenge. Reducing the cost of borrowing money is crucial to helping your manage your personal finances. By implementing these ideas, you can lower the cost of a loan by lowering the amount you pay in interest and associated fees.
1. Improve your credit score: Your credit score plays a significant role in determining the interest rates you are offered on loans and credit cards. A higher credit score generally results in lower interest rates, which can significantly reduce the cost of borrowing. Knowing your score and what other may see helps alert you to potential problems. To improve your credit score:
- Pay your bills on time: Consistent, timely payments on credit cards, utility bills, and other debts can enhance your credit score.
- Reduce credit card balances: Lowering your credit card balances and maintaining a low credit utilization ratio (the percentage of credit you’re using compared to your total credit limit) can boost your score.
- Review your credit report: Regularly check your credit report for errors or inaccuracies and dispute any mistakes. Accurate credit reports contribute to better credit scores. We offer a simple way for you to keep track of your credit score monthly, for free! Log in to Tulee, our digital banking platform, and opt in to our Credit Score Tool. You’ll receive your score once a month for free with no hit on your credit report. Play this video or review the step-by-step guide to learn more about the Credit Score Tool. If you haven’t enrolled in Tulee, do so now.
2. Shop around: We want you to have the best loan for your needs, even if it means getting it from another financial institution. Keep in mind, we’re a not-for-profit, which means we can offer loans at rates and terms that most banks can beat. To find the best deal:
- Compare offers: Obtain quotes from multiple lenders, including banks, credit unions, and online lenders. Compare the interest rates, fees, and terms of each offer.
- Secured vs. unsecured loans: Secured loans (backed by collateral such as a car or home) typically have lower interest rates compared to unsecured loans (which are not backed by collateral). We offer two secured loans that offer significant value. With our Secured Loan, you borrow against the funds that are already in your Membership Savings account. The rate is equal to your current Membership Savings rate plus 2.00% APR*. If you have a Certificate with us, use it to get a Certificate Secured Loan. You get a low rate on the loan and can borrow up to 95% of the Certificate. Rates for this loan are as low as the Certificate rate plus 1.00% APR**.
3. Consider loan types and terms: The type of loan and its term can affect the total cost of borrowing:
- Shorter loan terms: Loans with shorter terms generally have lower interest rates and result in less total interest paid, although monthly payments may be higher.
- Refinancing: If market interest rates have gone down since you took out your original loan, refinancing could help you secure a lower rate and reduce overall borrowing costs. Be sure to consider any fees associated with refinancing. If you’re paying a high rate for your vehicle loan, consider refinancing. Our vehicle refinance rate is just 9.49% APR.† That’s monthly savings you can put toward gas, insurance, or cool accessories. While home mortgage rates have been high, if you’re in the market to refinance your home loan, we can help. We own our own mortgage company, Community Mortgage Funding (CMF), who is ready to help with competitive rates and excellent service.
4. Utilize discounts and offers: Many lenders offer incentives that can lower borrowing costs:
- Auto-pay discounts: You can lower the interest rates on many of our loans if you set up Direct Deposit.
- Promotional rates: Get a 2.00% APR‡ discount on our auto, home equity, and Signature Loan and Lines of Credit with Direct Deposit and Auto Pay. This special offer ends October 11, 2024, so apply today.
5. Maintain a healthy debt-to-income ratio: Lenders assess your ability to repay loans based on your debt-to-income (DTI) ratio, which compares your monthly debt payments to your gross monthly income. A lower DTI ratio can qualify you for better rates. To improve your DTI ratio:
- Increase your income: Look for ways to boost your income, such as through a side job or salary increase.
- Reduce existing debt: Pay down existing loans and credit card balances to lower your monthly debt payments. Not only will you improve your DTI, you’ll save money by eliminating monthly debt interest.
Final thoughts.
Lowering the cost of a loan involves a combination of improving your credit profile, shopping around for the best deals, and taking advantage of discounts. By applying these strategies, you can lower the interest rates and fees associated with borrowing, ultimately saving money and improving your financial situation. If you have any questions about our loans, or are ready to apply, visit our loans page. You can apply on Tulee by clicking the Open Account Tool. Or call us at 800.877.2345. One last reminder, our 2.00% APR discount on select loans ends tomorrow, October 11, 2024, apply now.
*, **APR = Annual Percentage Rate. APR is the annual rate of interest that is paid on an investment, without taking into account the compounding interest within that year. Rates are subject to change at any time.
†APR=Annual Percentage Rates. Rates shown are our preferred rates based on credit worthiness and a 0.50% Auto Loan discount for Direct Deposit/Folio Direct Deposit going into a FIGFCU Checking Account (either High Yield or CashBack) in the amount of $1,000.00 or more monthly and Automatic Payment/Folio Deduction. Rates and terms are subject to credit approval. Other rates and terms are available. Other restrictions may apply. Financing available up to 130% of the Purchase Price, including tax, license, warranties and negative equity on a trade for qualified borrowers. Please speak with a Loan Representative for complete details and qualifying criteria. Rates and terms are subject to credit approval, are subject to change at any time and without notice. All values are determined by the Credit Union using either vehicle cost or Kelly Blue Book/NADA, whichever is lower. Other rates and terms are available.
‡SEPTEMBER 2024 DIRECT DEPOSIT / 2% LOAN DISCOUNT PROMOTION: Up to 2.00% APR (Annual Percentage Rate) discount on qualifying loan is for a current or newly established minimum of $1,000 monthly Direct Deposit into a Farmers Insurance Federal Credit Union Checking Account and Automatic Payment Deduction as a repayment method to qualify. Offer subject to change or cancellation at any time. Direct Deposit loan rate discount available if at a time prior to loan funding (a) Member has a current or newly established recurring monthly Direct Deposit of at least $1,000 from net pay, pension, or government benefits, and (b) Member is obtaining a FIGFCU loan. Maximum available loan rate discount of 2.00% if Member is eligible to combine Direct Deposit discount with other available discount a maximum of 2.00% shall be applied. If Direct Deposit stops before loan is paid off, loan interest rate will increase by 2.00%. Other restrictions may apply. All loans are subject to credit approval. Rate and terms are subject to change without notice.
Promotion Offering applies only to Consumer accounts, which must be in good standing. Guardian, rep payee or executor, collections charge-off, business, and/or organizational accounts are ineligible. Must be 18 years of age or older. FIGFCU reserves the right to end or modify this promotion without notice. Member cannot take advantage of this promotion more than once. Promotion cannot be combined with any other account promotion for a discount over 2.00%. Visit figfcu.org for account details, minimums, and fees. Federally insured by NCUA. Subject to employer and/or payer terms and conditions. FIGFCU will generally post payroll Direct Deposits on the day they are received, other exceptions may apply. Promo Period: September 3, 2024 to October 11, 2024. Signature Loans, Business Signature Loans and Agency Acquisition Loans not eligible for refinancing.
Available to new and existing Members who apply for eligible loans during the promotional period. Direct Deposit/Folio Direct Deposit into a FIGFCU Checking account (either High Yield or CashBack) in the amount of $1,000.00 or more monthly and Automatic Payment/Folio Deduction to the loan is required. Loan and checking accounts with Direct Deposit must be under Primary Membership. Checking/Direct Deposit can NOT be to a joint Checking account under a different membership. Signature Loans, Business Signature Loans and Agency Acquisition Loans not eligible for refinancing. Refinance Fees are as follows: Vehicle Loans – $200 refinance fee unless $4,000 in new money is added to the loan. Agency/Business Secured Loans – $400 refinance fee unless $10,000 in new money is added to the loan. Home Equity Loans/HELOC’s – $500 refinance fee for loans booked within the last 12 months unless $20,000 new money is added to the loan. Interest rate shown on final loan disclosures will be the higher rate prior to the discount. Loan will be booked with the lower discounted rate. Direct Deposit Addendum will be signed with closing loan disclosures.
