In times of financial crisis, a personal loan is the best way to manage your finances without any burden on your savings or investments. It is an unsecured loan provided by financial institutions to salaried and self-employed individuals. The best thing about it is that borrowers are not required to submit any collateral to the lender. There are minimum eligibility requirements and documentation to acquire a personal loan.
If you want to take a personal loan, apply online and get a loan amount you need to meet your requirements, be it financing a medical emergency, education, travel, or wedding. Some lenders offer up to Rs. 25,00,000/- as a loan which you can use to cater to your big-ticket purchases. The personal loan interest rates start from as low as 11.99% and go up to 35%.
Personal loan interest rate
Since a personal loan is unsecured, you will have to incur a higher interest rate compared to secured loans. The interest rate you are eligible to get from your lender depends on several factors like loan amount, loan tenure, income, credit score, etc.
Here are the top six tips to lower personal loan rates:
- Compare interest rates
The personal loan rates vary across lenders. You will need to compare the available personal loan interest rates from different lenders across India and then select a lender that offers the most affordable interest rate. You can visit your preferred lender’s web portal and find details about their interest rate offers.
- Choose a shorter loan tenure
Generally, the repayment tenure for a personal loan ranges between 12 months to 60 months. Although a longer loan tenure may lower your monthly EMI, the overall interest will be high. So, if you wish to get a lower interest rate, you may want to choose a shorter repayment tenure.
- Maintain a healthy credit score
While searching for ‘personal loan apply ‘ on the internet, you must understand that personal loans are provided based on your credit score. Lenders check your CIBIL score to determine whether or not you can repay the loan amount on time. It is a three-digit number that indicates your creditworthiness.
Lenders require a minimum CIBIL score of 750 to approve your loan application. If your credit score is more than 800, you are considered creditworthy and will be offered a lower interest Before applying for a loan, make sure you have maintained a healthy credit score to avoid high-interest rate risk.
- Disclosing your sources of income
Getting lower personal loan rates also depend upon your sources of income. Disclosing all your sources of income builds confidence that you will pay the loan amount without any delays or defaults. So, make sure to provide proof of all your incomes to get your required loan amount and also avail yourself of a lower interest rate.
Furthermore, your current company’s reputation also plays a crucial role in your loan application. Borrowers working for large-reputed companies are more likely to receive a lower interest rate than borrowers working for start-ups. So, you can leverage your company to get the best interest rate deal while applying for a personal loan.
- Maintain a good repayment record
When you get a loan, you will need to ensure making payments on time. Delays or defaults on loan payments jeopardize your plan of securing a lower interest rate when you apply for a personal loan. The financial company will review your previous repayment record and then decide on an interest rate that you are eligible to get. So, it is imperative to maintain a good repayment record of past loans before applying for a new personal loan.
- Prefer a floating rate of interest
There are two types of personal loan rates – fixed and floating rate of internet. A fixed-rate of interest, as the name suggests, remains constant through the loan tenure. Whereas, a floating rate of interest varies with market fluctuations. Generally, a fixed rate of interest is higher compared to floating interest rates.
A floating interest rate can come down in the future as per the Reserve Bank of India’s instructions. Besides that, it is already lower than the fixed interest rate. So, it would be wise to prefer a floating rate of interest while applying for a personal loan.
So, pay heed to the above-said tips to reduce the risk of getting a high interest rate while applying for a personal loan.