Personal loan interest rates affect the overall borrowing cost of the borrowers. A higher interest rate means higher EMIs which inturn leads to a high interest cost, and vice versa. Therefore, it is advisable to avail personal loans at lower interest rates to increase loan affordability and ensure easy repayment.
Personal loan interest rates depend on various factors including credit score, employment profile, EMI/NMI ratio, monthly income, employer’s profile and applicant’s existing relationship with the lender. These factors influence an applicant’s chances of availing personal loan at lower or higher interest rates. Let us see how can one avail personal loans at a low interest rate.
Tips for Availing Personal Loan at Low Interest Rate
Maintain your Credit Score at 750 and above
Applicants having a credit score of 750 and above are highly eligible for availing personal loans at lower interest rates. Therefore, one should avoid making late loan repayments and clear their credit card dues on time in order to improve their credit history.
Individuals should also check their credit report periodically and report any discrepancy or inaccuracy in the information either to the lender or to the credit bureau. These errors negatively impact the credit score thereby making it difficult for the individuals to avail loans at low interest rate.
However, applicants having a high credit score or no credit score can also avail personal loans, but at a higher interest rate.
Avoid Applying with Multiple Lenders in a Short Span
Applying with multiple lenders reduces the credit score of the applicants which inturn negatively impacts their creditworthiness. This happens because multiple lenders perform a hard enquiry on the credit report of the applicant within a short period. Every hard enquiry reduces the credit score making it difficult to avail loans at low interest rate in future. Therefore, one should avoid applying with multiple lenders at a time.
Applicant’s Existing Relationship with the Bank/NBFC
Most lenders offer pre-approved personal loans at preferential interest rates to their select existing customers. Therefore, applicants should check for any pre-approved offers with their existing lenders with whom they already have a savings/current/loan/FD account or have availed a credit card. Additionally, they should also compare the interest rates offered by their current lender with those offered by other lenders and opt for the banks offering lowest interest rates.
Visit Online Financial Marketplaces
The interest rate differentiation of different lenders varies depending on various factors such as monthly income, employment profile, etc. For instance, some PSU banks offer personal loans at low interest rates to salaried individuals. Among the salaried individuals, lenders offer preferential interest rates to the employees of Central/State Government due to their job and income stability. Also, most lenders offer low interest rates to individuals whose EMI/NMI ratio does not exceed 50-55%.
Therefore, prospective personal loan borrowers should visit online financial marketplaces like Paisabazaar to compare various interest rate offers provided by different lenders and opt for the lender offering best interest rates.
Have a Stable Employment History
Individuals who are planning to avail personal loans in the near future should avoid switching jobs frequently in order to reflect a stable employment history. Individuals having an unstable employment profile carry a high credit risk due to income instability, and hence, are not allowed to avail personal loans at low interest rates.
Conclusion
The aforementioned tips might guide the prospective personal loan borrowers to avail personal loans at low interest rates. In order to save on the EMIs and the overall interest cost one must opt for lenders offering personal loans at low interest rates. Applicants should check and compare the interest rate offers provided by various lenders and make informed decisions.
