Be it any financial emergency, a personal loan is an ideal credit facility as it comes with various benefits, including no restriction on end-use, no need for collateral/security, instant disbursal, minimum documentation, and so on.
You can use personal loans for marriage, medical emergencies, vacation, debt consolidation, educational expenses, renovation of your house, meeting small cash crunch in your business, and any other purpose.
If you too are looking for a personal loan, below are some tips to help you get lower personal loan interest rates:
· Compare personal loan interest rates of different lenders
It is always useful to compare interest rates offered by different lenders to get the best personal loan deal. You can do it easily by visiting online financial marketplaces and comparing different personal loan offers. However, make sure you meet the eligibility criteria of the selected lenders. Also, apart from the interest rate, make sure to calculate other expenses as well, including processing fees, prepayment charges, and so on.
· Repay your existing loans diligently
If you have any existing loan EMIs or credit card dues, try to pay them in full and on time. It will help you maintain a good repayment record and you can negotiate for a better personal loan rate of interest with the lender. Any default or delay in loan payment can reduce your chances of approval for a new loan and you may find it difficult to secure a good deal.
· Maintain a good credit score
For a personal loan, a CIBIL score of 750 or above is usually considered good. A good credit score increases your chances of personal loan approval and can also get you a loan at a better interest rate. Many lenders offer concessional rates to borrowers having an excellent credit score. That is because a high credit score displays responsible credit behaviour and higher creditworthiness.
· Check out for offers and concession
When you plan to apply for a personal loan, look out for special offers and concessions extended by lenders. Many lenders introduce special personal loan offers on occasions like Diwali, New Year’s Eve, etc. There can be special schemes for specific borrowers too. Grabbing a personal loan deal with a low interest rate will eventually help you reduce EMIs and save on the overall loan expenses in the long term.
· Maintain a good relationship with your bank
Maintaining a good relationship with a bank/lender where you have savings/current/salary account, fixed/recurring deposits, or existing loans/credit cards can help you secure a personal loan at a lower rate of interest and better terms. That is because the lender will be aware of your responsible behaviour in terms of repayment. The longer and stronger the relationship is, the better the interest rate will be.
· Check the interest calculation method
Make sure you check the method of calculating the interest payable on a personal loan used by a particular lender. Some lenders may offer you a loan at a lower interest rate, but you may end up paying a huge interest amount at the end of the tenure. Lenders offer personal loans at a fixed interest rate or at a floating interest rate. In case of fixed interest rate, the interest remains fixed for the entire tenure. Whereas, in the floating interest method, the personal loan interest rate varies as per the changes in repo rate or other market conditions.
· Have a stable employment history
Having a long and stable employment history can improve your personal loan eligibility and also get your lower rate of interest on a personal loan. Most lenders require applicants to have a minimum of 2 years of work experience, including 1 year with their current employer. Also, people employed with reputed organisations (public and private) are often offered favourable rates on personal loans. This is because lenders feel that these applicants have stable jobs and income and they will not default on their borrowings.
If you are planning to secure an online personal loan, you must consider the tips and practices mentioned above. They can help you get the best personal loan deal at a lower rate of interest, which will reduce your overall loan repayment burden in the long term.