5 Ways to Get the Best Personal Loan Interest Rate
The time when one had to rely on family, friends or moneylenders for immediate need of funds is now long gone. Today, personal loans have made it convenient to meet any financial requirement, be it for education, marriage or for funding festival celebrations.
Moreover, there is no collateral needed for a personal loan and hence is disbursed quickly and with minimum documentation.
With numerous benefits to it and its ease of application, the only cost involved in a personal loan is the interest on it.
Given the many attractive features of a personal loan, all you need is to focus on the best interest rates on personal loan.
Different banks offer different interest rates, but here are some tips on how you can get the best deal.
1. Maintain a high credit score
As a personal loan is unsecured, the lender relies on your credit score before giving you the loan.
The better the score, the better the interest rates for you. If your credit score is good, (an ideal credit score ranges within 750 – 900), the lender is assured, you will repay the loan amount on time.
Whenever you plan to take a personal loan, ensure your credit score is good.
If not, you may need to resolve it, and then apply for a personal loan after a few months, to get the best rates.
One way to do it is to pay credit card bills on time and avoid crossing the credit limit.
2. Look for variable interest rates
Personal loans usually come with a fixed rate of interest.
However, you could also look at a personal loan that offers a variable rate of interest.
Variable rates of interest fluctuate depending upon the Marginal Cost of Lending Rate.
A personal loan with variable rates has lower interest rates than loans with fixed interest rates.
However, if variable rates are high at a particular time, you can switch over to a fixed rate of return anytime without additional fee.
Keep a close eye on variable rates to take advantage of a drop in the interest rates.
3. Explore all available offers
As a privileged customer of a bank, you may want to opt for its personal loan.
Since you are a long-standing customer, you may want to receive better interest rates on a loan.
However, although your bank may prioritize your loan approval, you may not necessarily receive a low rate of interest.
Therefore, it is necessary to look for other options too. Before you apply for a personal loan in your bank, look out for other offers as well.
Compare the interest rates of personal loans among various lenders. You may find a better offer at a lower rate than your bank.
4. Avoid multiple loan applications
Applying for multiple loans at the same time can have an adverse impact on your CIBIL score and credit rating; it could reduce your credit worthiness.
A lender may put your loan at a higher interest rate, because of risk-based pricing (the concept of giving different interest rates to different consumers based on their creditworthiness.
Your credit score, employment history, credit score, etc. affects risk-based pricing.)
Avoid making multiple loan applications at the same time. Lenders could reject your application, as they feel you may not be able to repay their loan, if your record shows multiple applications at several places.
5. Look for a shorter loan term
Personal loan rates also depend upon the assurance the lender has on your credibility, to pay back the loan amount.
The faster the lender receives the lent amount, the lesser is the risk factor on their money.
Some lenders provide lower interest rates on short-term personal loans. With a longer tenor, the risk of default increases.
The bank/lender maintains a higher interest rate, for a long tenor, due to the risk factors.
Hence, personal loans can prove to be a great aid when you are looking for a quick borrowing without collateral.
The process of taking a personal loan is simple with an online application.
Lenders allow you to check your EMI payments through online EMI calculators.
While searching for a personal loan with the best rates, you can also calculate the total interest rate on a particular amount beforehand.
Look for the EMI calculator to calculate.
You can also avail pre-approved offers on personal loans, home loans, business loans, and a host of other financial products.
Not only does this simplify the process of availing your loan, but also helps you save on time.
All you have to do is share a few basic details and check out your pre-approved offer.
Category: Loans
