Tips to get the best deal on personal loan interest rate
A personal loan is an unsecured loan that can be availed without providing any collateral or guarantor. Unlike a car loan or home loan, a personal loan can be used for any purpose including home renovation, paying education fees, medical bills, wedding expenses or others. Since this type of loan is an unsecured loan, lenders usually charge a high-interest rate. However, interest on this type of loan varies depending on your eligibility criteria i.e. your age, income, job type, credit score and other factors. If you are looking to get personal loan, then read this article to learn the tips that will help you get the best interest rate.
Factors that impact personal loan interest rate
Credit score: Your credit score is a 3-digit numeric score that determines your loan eligibility. The score depicts your credit behavior and repayment history. Ranging from 300-900, a score of 300 is considered to be the lowest and 900 the highest. A credit score of 750 and above is considered to be an ideal score for getting a loan and also helps you get the loan at a low-interest rate.
Income: Having a high salary has a very big advantage as it ensures the lenders regarding timely loan repayment. To get a personal loan, you must have a minimum monthly income of Rs. 20,000.Also, if you are self-employed, you can submit documents like your bank statement, last 2 years ITR or FORM 26A.
Relationship With the bank: Banks appreciate loyalty and in case you have had good loan repayment record and have been a loyal customer, then you might get the loan at low-interest rate.Additionally, if you hold a salary account with the bank then you are likely to get the loan at a low rate of interest.
Employer and nature of employment: Lenders usually prefer offering loans to salaried professionals employed with a public, private or government establishment. Additionally, your tenure of employment is also considered. Lenders have a set criterion of a minimum of 1-year work experience and 6 months experience at current job.
Loan default: In case of any defaults in your credit profile, your application will be rejected or you will be offered the loan at a higher interest rate. Lenders usually prefer offering loans to individuals with no default in the past 1-2 years.
How to get the best personal loan interest rate?
Build a good credit score: Your credit score is a reflection of your credit behavior helping lenders determine your repayment history, current liabilities, repayment capacity and others. A credit score of above 750 is considered to be an ideal score for availing a loan. However, to get the loan at best interest rate, you must build a good score by paying EMIs on time, having a balanced profile of secured and unsecured loans, regularly checking your credit report and others.
Compare interest rates: One of the best ways to get a good deal on the personal loan interest rate is to compare rates offered by online lenders. This allows you to opt for the best lender and also compare other features such as foreclosure charges, late payment charges and others.
Pay off your existing debts: If you have any existing debt, then you must clear it off as lenders consider your debt to income ratio when deciding your loan amount. If you have a high debt to income ratio, then the lender might choose to reject your application or offer the loan at a high-interest rate.
Apply with a co-applicant: Apply with a co-applicant if you have a low credit score. You can co-apply with your spouse or parent if they have a good credit score. When applying with a co-applicant, lenders take into account financial information of your co-applicant. This thus ensures that you get the loan at low-interest rate.
Getting a personal loan at low-interest rate helps you save a good amount of money throughout the tenure of the loan. Additionally, you pay less EMIs that decreases your EMI outflow. Follow the above tips to ensure you get a good deal on personal loan EMIs and don’t have to bear heavy EMI payments each month. Also, if you don’t meet the above requirements, then don’t worry we have got your back. Simply apply for a personal loan or consumer durable loan with Credit Fair to increase your credit score and be eligible to get more unsecured credit in future.