Be it any kind of immediate expenses like house renovation, debt settlements, or a surprise medical bill, most people prefer personal loan. It is the easiest way for you to borrow money from the bank at times when you need them most. Normally, loan disbursals take a day or two from the time of applying, and Minimal documentation has made Personal Loan, a go-to option for many people. One of the important components of a personal loan is the interest rate.
For the loan you avail from them, the bank will charge an interest charge which will be added along with your principal repayment. Many personal loan borrowers are looking for loans with lower rate of Interest. Although, the interest rates of Personal Loan are high when compared with other types of loans, you can still negotiate with the lender, if you have the right credit score and documents. Following are some of the easy tips which can avail you get a personal loan with low interest
Five tips to get personal loan at a lower interest rate
a. Improve your credit score
One of the best ways to increase your chances of obtaining a personal loan is to increase your credit score. A higher credit score will give the impression that you are a reliable borrower who has settled all his claims well. In this case, the bank would be willing to offer the personal loan at a lower interest rate and might also give the tenure you require. Since the personal loan is given without any collateral, banks will expect a good credit score in order to sanction the loan. A few ways through which you can improve your credit score are
i) If you use a credit card make sure you pay your bills on time
ii) Pay the EMIs on time if you have taken any loan
iii) You also consider the credit utilization ratio. It is how much credit you’ve taken divided by the credit available to you. It is advised to keep the credit utilization ratio within 30
iv) Do not apply for multiple loans or credit cards at the same time
b. Salary Account
Since, personal loan is given based on Individual’s credit capability. You can start your personal loan journey with banks with whom you have already account with. Banks where you hold deposits or salary account know your credit history better and may offer better loan deals with lower interest rate and processing fee. Some lenders offer special corporate discounts to employees belonging to reputed institutions.
c. Flat and reducing interest rate
The bank may offer you loans at a flat or at reduced interest rates. In case of flat interest, the interest charge is calculated on the principal amount of the loan throughout its tenure. Whereas in the event of diminishing interest rate, the payment of interest is calculated on the outstanding principal. Taking a personal loan on a reducing interest rate could save you more than taking a loan on the flat interest rate.
d. Note the other charges
Apart from the principal amount and loan charges, a personal loan typically comes with other charges such as processing fees, GST, and other charges. You should take into account all these charges to arrive at the complete cost of the loan.
e. Compare the interest rate
To ensure you get the best deal on the loan interest, make sure you compare the interest charges from various banks. While it is not physically possible to walk to every bank to enquire about these charges, you can do so using online financial marketplace website like Fincover. With Fincover, you can compare the loan quotes from mutiple banks and NBFCs, and make a well informed choice.
Do check out: The Rise of Digital Payments: India’s Path to a Cashless Future
