A personal loan is the most sought after credit facility during any emergency. Personal loans do not require any collateral and can be used for any purpose. However, with the availability of so many offers, it becomes extremely difficult to find the lowest personal loan interest rate. With the usage of advanced technology, nowadays, it has become much easier to avail of a quick personal loan. Still, availing a low interest rate personal loan is not an easy task. The reason is a list of parameters considered by lenders for deciding a personal loan interest rate.
Here we will discuss some useful tips to get a low interest rate on a personal loan.
- Maintain an excellent credit score
As a personal loan is unsecured in nature, having a good credit score is a must. It is the most important Personal Loan Eligibility Criteria considered by most lenders. This loan is not backed by any asset and that is why your credit score is the only proof of your creditworthiness. A credit score provides assurance to the lender.
Maintaining a high credit score of 750 or above improves your chances of getting a personal loan at a low interest rate. You can easily check your credit score for free online. If your score is low, and take steps to improve it.
- Maintain a reliable repayment history
Make sure to pay your existing loan equated monthly instalments (EMIs) and credit card bills timely and in full. Clear off your debts each month without a miss or delay.
It will help you in getting a better deal when you apply for a fresh loan in future. This is because having a clean EMI repayment history is good and makes you creditworthy in the eyes of lenders. This way, you can negotiate with the lender for a better interest rate on a personal loan.
- Make use of your employer’s credibility
You can use the credibility of your employer or profession for negotiating the rate of interest with the lender. Working with a multinational company or reputed/ blue chip company, and drawing a high income can work in your favour and help you get a low interest on a personal loan.
Lending institutions are more favourable towards loan seekers who are employed with the state/central government, PSU, or quasi-government organisation. This is because your employer’s ability to provide a steady job and good income is higher, and therefore lenders expect that the borrower would be more capable of repaying the loan dues on time.
- Have a stable employment history
Your job stability also impacts your loan eligibility and interest rate. Most lenders look for an employment history of at least two years, including one year with the current employer, to provide you with a loan at better terms and rates.
- Avail the benefit of seasonal offers
Many lenders provide seasonal offers during festivals or special occasions. These offers may include lower personal loan interest rates, zero processing fees, interest rate concession to existing customers, pre-approved loan offer, and so on. Look for these offers as they can get you a lower interest rate deal.
- Apply with the known lender
If you have a long and good relationship with any bank, applying with them can be a good option. Applying for a personal loan with a known bank can get you more leverage for negotiation. Lenders usually offer better interest rates and terms to their existing customers. You can also be eligible for a special discount on the interest rate.
- Compare all available offers
The Internet is full of personal loan offers extended by banks, Non-Banking Financial Companies (NBFCs), and all other financial institutions and apps. With this readily available information on your hand, you can easily compare and inquire about different loan offers.
Now you can visit the websites of all banks and financial institutions to get complete information about their offers. Doing some online research will help you in comparison and you can get a better interest rate after knowing all the offers available to you.
You can also make use of an online EMI Calculator to check your personal loan eligibility for the available offers before you apply for the loan.
- Check the method of interest calculation
Different lenders have different methods for calculating the interest rate on the loan amount. Only seeing a low-interest rate offer does not mean you will get a lower amount of interest. Check the mode of interest calculation of the lender to determine the amount of interest that you will have to pay for the loan amount.
In addition to the tips mentioned above, some other factors also influence the personal loan interest rate, such as residential stability, FOIR (Fixed Obligation to Income Ratio), and so on.
Now that you know the ways to get a better interest rate, it will be easier for you to apply for a personal loan with a low rate of interest.