Maria Nadar
Tips on how to get the lowest interest rate on a personal loan
A personal loan is an unsecured loan that can be taken out without the need for collateral or a guarantor. Unlike a car or home loan, a personal loan can be utilized for any reason, including home improvement, schooling, medical costs, wedding expenses, and so on. Because this is an unsecured loan, lenders will typically charge a high-interest rate. However, the interest rate on this loan is determined by your qualifying criteria, which include your age, income, work type, credit score, and other things.
If you’re looking for a personal loan, read this article to learn how to secure the greatest interest rate possible.
A Credit score is one factor that influences personal loan interest rates. Your credit score is a three-digit number that affects whether you are eligible for a loan. Your credit conduct and payback history are reflected in your score. Scores range from 300 to 900, with 300 being the lowest and 900 being the best. A credit score of 750 or more is considered to be optimal for obtaining a loan since it allows you to get the loan at a low interest rate.
Income: A high wage has a significant advantage because it assures lenders of timely loan repayment. A monthly salary of Rs. 20,000 is required to qualify for a personal loan. You can also provide documents such as your bank statement, last two years’ ITR, or FORM 26A if you are self-employed.
Relationship with the bank: Banks value loyalty, so if you have a solid track record of loan repayment and have been a loyal customer, you may qualify for a low-interest loan.
Furthermore, if you have a salary account with the bank, you are more likely to receive a low-interest loan.
Employer and nature of work: Lenders like to lend to salaried professionals who work for a public, private, or government organisation. Your employment history is also taken into account. Lenders require a minimum of one year of work experience and six months in the current position.
If you have any defaults on your credit report, your application will be denied or you will be offered a loan with a higher interest rate. Lenders prefer to lend to people who have not defaulted in the previous two years.
What is the best way to acquire the lowest personal loan interest rate?
Boost your credit score: Your credit score reflects your credit history, current obligations, repayment capacity, and other factors that lenders use to determine your payback history, current liabilities, and repayment capacity. A credit score of 750 or higher is considered excellent for obtaining a loan. To achieve the lowest interest rate, you must first create a solid credit score by paying EMIs on time, maintaining a balanced portfolio of secured and unsecured loans, and monitoring your credit report on a regular basis, among other things.
Compare interest rates: Comparing interest rates given by online lenders is one of the best ways to get a decent deal on a personal loan. This helps you to choose the best lender while also comparing other factors such as foreclosure fees, late payment fees, and so on.
Pay off current debts: If you have any previous debt, you must pay it off because lenders consider your debt-to-income ratio when determining the amount of money you can borrow. If your debt-to-income ratio is high, the lender may reject your application or offer you a loan with a high-interest rate.
If you have a low credit score, consider applying with a co-applicant. If your spouse or parent has a strong credit score, you can apply together. When you apply with a co-applicant, lenders consider your co-financial applicant’s information. As a result, you are guaranteed a low-interest loan.
Obtaining a low-interest personal loan allows you to save a significant amount of money over the loan’s term. Furthermore, you pay fewer EMIs, lowering your EMI outflow. Use the ideas above to ensure you get a decent deal on personal loan EMIs and do not have to make large monthly EMI payments. Also, do not worry if you do not satisfy the above conditions; we have got you covered. To improve your credit score and be eligible for additional unsecured loans in the future, apply for a personal loan or consumer durable loan with any credible NBFC.