How do you find the cheapest loan? Through a combination of factors that include understanding your credit score, determining the best type of loan for your purposes, and shopping around. Settling for the first offer for which you are approved is one of the worst ways to save money on a loan.

On the flip side, applying for numerous loans can damage your credit score (such as applying for a wide range of credit cards, even if you cancel the ones you are not interested in). Carefully conduct research prior to applying before making the decision to go forward with the application process.

If a lender is unclear about your potential payments, move on to a different provider. Some lenders will only be upfront with you if you agree to go through with the application process.

• The type of loan will obviously have a bearing on the payments and terms. Many long-term loans, such as secured loans, have penalties for closing early. If you find a lower interest rate option later on, you may not be able to switch without losing money. So carefully consider these factors before being locked into a loan program.

• Be wary of various add-on sales. Purchase protection programs are tag-on offers and usually cost more directly from the lender. Using an independent program will usually cost less.

• Changing credit card debt to a card with a zero percent introductory rate or one that offers a very low rate on transferred balances can save on the overall debt. However, this only works if you don’t incur more debt on the card. In addition, if you frequently change credit cards, this could ultimately make your credit rating worse. Each time your credit is reviewed for a loan, you score takes a hit. Too many of these, even if you regularly make payments, can lower your score and creates an image of instability.

• Shop around. Competition among lenders can work to your advantage, particularly if you have good credit. Secured loans are likely to have lower interest rates but are also more likely to carry penalties for closing early. If you are able to obtain a low rate, a fixed-rate loan is often better than a variable rate. Of course, if things change and rates drop, you’re stuck with your fixed rate. However, the security of knowing what your payments will be may be worth it and easier to budget for.

• Consider the purpose of the loan. Is it worth risking your home for plastic surgery? Your mortgage is one thing, but risking your home or vehicle for other purposes may not be the wisest choices. However, conducting research on a variety of secured and unsecured loans to best suit your purposes can help you save money over the long term and minimize risks.

• Know exactly what you can handle for payments. The lowest rate and best terms will not save much if the result is your being unable to make payments, assessing penalties, or declaring bankruptcy.

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