Zero end restriction on fund usage, security free nature and wide availability make the personal loan a highly popular financial tool when it is about facing a sudden or temporary financial crisis. As personal loan has garnered great popularity in the past few decades, there is a wide market for the product. From nationalized banks to DSAs and NBFCs – all are offering this loan at the lowest personal loan interest rates and better terms and conditions. However, lenders are ensuring to do their part. But owing to the rising competition amongst lenders, you, as a seeker of a personal loan, must be extra careful when availing of the personal loan.
Mentioned here are some crucial tips to get the best personal loan offer at the lowest interest rate:
Maintain a strong credit score
A credit score of 750 and above is commonly looked upon as decent. Having this score enhances your chances of getting new credit approval, and it also additionally empowers you to be approved for the desired personal loan amount for the ideal repayment tenure and, most importantly, at a reasonable interest rate.
All of it depends upon the CIBIL score, as your CIBIL indicates your financial health. It shows all your repayments and borrowing towards the loan. Thus, the individuals with a strong credit score are considered more credible and can avail of the loan at a lower rate of interest than those with a credit score of below 750. So, if you are looking for personal loan approval at a lower rate of interest, then you must maintain a strong credit score.
Compare a rate of interest with distinct lenders.
The rate of interest is something on which your cost of borrowing depends. As there are various lenders offering personal loans, it is your responsibility to compare amongst lenders and avail yourself of the loan from those who are offering it at the lowest rate possible.
For striking a comparison, it is better if you visit online financial markets and compare distinct offers. This will assist you in securing a suitable deal, and you might get some great offers also.
Check the interest calculation method.
Indeed, everyone who chooses to avail of a personal loan is unaware of this. But it is very important for you to check the method used by lenders to compute your interest payable on a personal loan. Personal loans might be offered at a lower interest rate, but you might end up paying higher towards the end of the tenure. This is because many lenders provide personal loans either at a reducing interest rate or at a flat interest rate basis.
Let us understand both concepts one by one. In the case where lenders charge a flat rate, the interest is computed on the whole principal component throughout the repayment tenure, while in the reducing rate basis, the interest is computed just on the outstanding amount. Hence, when your personal loan lender offers you a personal loan at a flat rate of interest, you end up repaying much more.
Earned fixed income
Most crucial thing which the lender considers while lending is your repayment capacity. Holding a fixed income source and job stability certainly is a plus point. This also assists you in availing loan approval at a lower interest rate because lenders are thoroughly sure about your repayment.
Other crucial parameters to be analyzed
It is not just the rate of interest that decides your overall borrowing cost. It is also the combination of rate of interest, processing charges, and taxes like GST that contributes to your overall personal loan borrowing cost. In this race of availing the lowest interest rate for a personal loan, most of you forget to factor in other crucial aspects, which can enhance your cost.
When applying for a personal loan, it is crucial to consider the processing fees and the applicable taxes. Additionally, you must also check if there are any hidden charges. Checking such crucial charges can assist you in bringing down your interest cost for a personal loan.
Compare the rate of interest and check out for any seasonal offers.
Depending upon your eligibility and requirement, approaching an online financial lending space can assist you in comparing and selecting the best choice for yourself amongst different lenders. Also, you can check with your existing lender if it is willing to offer any festive offer or lower interest rate on a personal loan. Note that availing of personal loans during festive times may prove to be beneficial for you.
Maintain a strong repayment history
In place of repaying only the minimum payment amount on your credit card each month, ensure to pay the bill amount in totality and clear off any debts. Also, you must follow up on various other EMI repayments and other others. Having a strong repayment history can allow you to avail a personal loan at lower rates with the lender.
If you are one of those working for a reputed company or MNC (multinational company), then you will be eligible for favourable deals. Your employers’ potential to offer steady employment is higher, and thus the lenders conclude that you are likely to hold a stable income for repaying your loan EMIs on time. Owing to this reason, it becomes easier to avail of personal loans at a lower rate of interest.
Your past employment
Having residential stability, a good job and maintaining a strong FOIR (fixed obligation to income ratio) can assist you in forming a strong credit score, which may partly affect your rate of interest also. FOIR is a commonly utilized parameter by lenders to decide your eligibility for personal loan. Few financial institutions require you to have a job history of at least 2 years, including a minimum of 1 year with your present employer. In case you are employed with central or state government organizations, then you may be looked upon favourably by the lending institutions as you hold higher chances of securing a lower rate of interest on a loan due to higher job stability.
Contact your existing banker with whom you share a long-lasting relationship.
If you are one of those with strong credit history with zero missed repayments, then you can contact the banker with whom you hold a good relationship and ask for a suitable interest rate. Lenders may be willing to offer to retain you as an existing customer.