Small Business Loans: Getting The Lowest Interest Rate

Small Business Loans: Getting The Lowest Interest Rate

Small business loans are easier to get than large business loans, but you still must have good credit in order to qualify for a low interest rate. The better your credit, the lower your interest rate will be, so it is important, if you can, to improve your credit the most you possibly can before trying to get small business loans. The way to improve your credit is to pay for things on credit and pay off your required payments in full on time each month. Do not try anything questionable that claims it will boost your credit up faster, lots of times those backfire, and then you are left wondering why your credit went back down so fast, or they may not even work at all.

So, how do you know if you have good enough credit? Anything over an 800 is about the best you will be able to get. A credit score of above 800 is considered excellent credit, 750-800 is very good, 700-750 is good, 650-700 is fair (average is around 678), 600-650 is bad, and anything below a 600 is very bad. You can constantly check your credit on-line for about a dollar to ensure your credit is where you want it before getting your small business loans.

When you are ready to apply for loans, you need to make a decision about whether you want secured loans or unsecured loans. Secured loans will generally give you lower interest rates because they will take your assets that are worth the same amount as the loan amount you take out if you are not able to pay back the loan. The assets are decided ahead of time, and therefore, you both agree to it. It is therefore especially important to look at secured loans if you have bad credit. Lenders won't feel they have to raise the interest rates as high if they know they can take your assets valued at the same amount.

Unsecured loans will generally have a higher interest rate because it's the way lenders protect themselves in case they don't get paid the full amount of the loan back because with unsecured loans, they only have your legal word that you will pay back the loan. Therefore, you may not lose your assets if you can't pay back the loan, but you will be paying a higher interest rate, even if you can and do pay off the loan. Also, with unsecured loans, interest can continue to accumulate on the unpaid balances.

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