Times are tough, people are at a point where they may need some extra money just to get by. You would be amazed out how much money you could save with a cheap loans. What is the key to a cheap loan? The most important aspect of any loan is the interest rate. There are many other aspects of course and I will go over them later on in this hub. If you are looking for the truly cheapest loan, it's all in the interest rate. Just to prove to all of you reading just how important cheap loans are, here is an example:

Jim and his wife Jane decided that it was time to buy a house. They went to their bank, we'll just call it bank A, and applied for a mortgage. Since he and his wife had good credit they were approved for a $200,000.00 mortgage with a 7.05% interest rate. Jim didn't shop around for the cheapest loan. If Jim had done a little research he might have found a cheap loan elsewhere. What would have happened if he had gotten a loan from bank B at 6.50% interest, that's only a 0.55% difference. Lets see how much money he could have saved.

Bank A (7.05%) - With bank A Jim's mortgage will cost $1,337.33 each month and he will have paid $281,438 in total interest over 30 years.

Bank B (6.50%) - If Jim had chosen Bank B his monthly payment would be $1,264.14 with a total of $255,089 in interest paid over 30 years. Bank B would have saved Jim $73.19 per month and $26,349.00 over the life of the loan.

I know that example is a bit cheesy and might remind you of a remedial math problem from middle school but it brings up an important fact. Doing your research and hunting for cheap loans can save you quite a bit of money. Jim decided to go with his personal bank instead of shopping around for the cheapest loans and it cost him money. Granted 73 dollars isn't a fortune but it adds up as you can see in the example. The average mortgage lasts 30 years and although there was only a slight variation in the interest rates between bank A and bank B, it added up to $26,349 over the life of the loan. This is a simple example to show you the importance that interest rate plays in finding the cheapest loans.

There are many different aspects that may affect the total cost of your loan. This is when hunting for cheap loans becomes a bit more intricate. On most larger loans, such as mortgages, you will most likely need to put a lump sum down before you can qualify for the loan. This is normal and will not affect the total money spent on the actual loan because it will either be deducted from the principal or not include in the loan at all. In recent years a certain type of loan, an ARM loan, has become quite popular. In my opinion, ARM loans are not only a waste of money but they can also be very dangerous.

You can get an ARM loan in many different forms, 5/1, 3/1, 5/2, 3/2, etc... Those numbers may look like nonsense to your but they are very easy to follow. Basically, the first number stands for the length of time that the original interest rate will be used to calculate your monthly payments The second number stands for the frequency that the rate will be updated. So, with a 5/1 ARM loan the original rate of the loan will be valid for the first 5 years and then the loan will change depending on the current federal interest rate and be updated every year. With a 3/2 ARM loan the rate will be stable for 3 years and change every 2 years thereafter.

ARM loans may seem like cheap loans at first glance but can be very dangerous. When you decide to use an ARM loan for a mortgage, the rate may be considerably lower than many 30 year fixed rate loans. Although, after the initial rate expires you will be forced to pay a monthly mortgage calculated using the current federal rate. This could very well be lower than the current rate but what if its higher. Could you afford to pay a mortgage with an interest rate that jumped from 5.5% to 7%?Using an ARM loan is almost like gambling with your home and can be very dangerous.

The most important thing you can do to find the cheapest loan is to do as much research as possible. Shop around for cheap loans and ask questions. If there is something you are unsure of or don't understand, don't sign the contract. Ask the loan officer to thoroughly explain all the aspects of the loan before you commit to it. If you feel uneasy or unsure, or if the person you are dealing with isn't as helpful as you'd like them to be, simply take your business elsewhere. Remember when you are looking for a loan, you are how banks make their money and therefor are a very important recourse.

If you are looking for more cheap loan tips, over the next few months I will be building a resource of information on this topic. I will add a link to that site from this hub when it is ready. Until then I hope you found this information helpful and that you will make that extra effort and do your homework to find cheap loans.