How to Get a Personal Loan at the Best Possible Interest Rate

Personal loan interest rates are rising as the Reserve Bank of India (RBI) tries to curb record-high inflation. RBI does this to make lending more costly and to slow the economy, ideally without causing it to enter a crisis.

Yet, rising rates imply that loans become more costly and less appealing than the pandemic’s record high demand. 

But could you still receive a personal loan with a fair personal loan interest? Here are some tactics to get a personal loan at the best rates.

Features of a Personal Loan  

• No need for an asset A personal loan is unsecured. This implies you won’t have to provide security to get your loan. While this may cause your interest rate to increase, matching the eligibility rules can easily get you a low-interest rate.

• The least amount of paperwork is requiredIn this day and age, verification and paperwork are much faster. This is true for personal loans since they are quick to get and only need a few approval papers.

• Simple approval Personal loans are available with fast and simple approval. This is why it is the ideal option in times of money crisis. Also, the process has gone digital, which has reduced the time required for verification.

• Versatile in natureExcept for investing and illegal activities, a loan may be used for anything. Other types of credit, when granted, are for a specific reason and may only be used for that reason. A home loan, for example, is used to purchase a house, while a vehicle loan is used to buy a car. On the other hand, a personal loan may be used to cover any pressing needs.

Simple Strategies For Reducing Personal Loan Interest 

Here are the tips to reduce a personal loan’s interest rate:

1. Make Timely Debt Repayments
   Pay your monthly obligations, including your credit card balance, in full. The other debts you have should likewise be repaid promptly. Then, you might get better terms on loans in the future. You will have a better chance of negotiating reduced personal loan interest rates and conditions with the lender if you have a solid EMI repayment history. 

2. Good Debt/Equity RatioThe capacity of a debtor to repay the debt relative to the total gross earnings is known as the debt-to-income ratio. You may get the ratio by dividing your total EMIs by your salary. A low rate may be obtained by showing the lender you have control over the finances by having a favourable ratio.

3. High CIBIL Score The CIBIL score evaluates a buyer’s trust and is vital in reducing a personal loan interest rate. A high score indicates your ability to repay the loan on time and the low chance of default. Lenders often reduce rates for a strong CIBIL score. A good score is 750 or above. This shows responsible credit behavior and your ability to manage money.

4. Employee ReputationLending firms prefer to provide loans to users who work for the state, federal government, or PSUs. Better terms may also be negotiable for reputable firms, MNCs, and similar entities’ staff members. Lenders anticipate that you will have a reliable source of income, respectable employment, and a plan to guarantee that you will pay back the loan when due.

5. Loan AmountReducing the loan rates may be achieved by taking out a loan for a lower sum. As the sum is modest, the lender is certain that the loan will be returned on time, which lowers the likelihood of default. 

6. Check The Interest Calculation ProcessDespite the lender providing you with a lower personal loan interest rate, you can pay more interest throughout the loan. This is so that different lenders may calculate rates differently. The rate that is offered on loan may be fixed or fluctuating. A floating rate is subject to monthly adjustment, but a fixed rate means a set lending rate for the time of your loan. Typically, the rate is 1% to 2% higher than the variable rate. While a fixed rate does not change throughout repayment, the variable rate does base here on benchmark rates set by NBFC.

7. Relations With The LenderYou can get a loan with a cheap personal loan interest rate and better service conditions if you have a good link with the lender. The lender would have noted your positive credit behaviour. The risk is lower than if you were a new client.

8. Shorter TermWhile you can choose a longer loan term, going with a short term might help you pay less interest overall. As a result, the effective rate on the principal amount will be lower. In a global lending market, lenders may be eager to grant loans with low rates since lenders know that short-term loans have a lower default rate.

9. Choose Lender’s Offers or Better DealsTry to connect with the top lenders on the market as you compare them. This can help determine any unique offers lenders may be willing to provide. Also, most lenders advertise special deals and discounts during the holiday season. Enrol for these emails or SMS’, and keep an eye out for them.

10. Interest Rate ComparisonNot all lenders will provide loans with high rates. Check several banking firms’ personal loan interest rates before requesting a loan. Do your research and ask them for different offers. This will help you decide which lender would provide you with the best personal loan interest rate.

11. Good Loan Repayment HistoryYou may get a low-interest loan by making prompt paybacks and paying your EMIs on time with no defaults. A solid payback record gives the lender trust and might help lower rates.

Conclusion

A personal loan can be helpful when you are short on funds and need the money. Unlike other loans, which need you to submit collateral against it, this does not require you to submit security against it.

Since personal loan interest rates are among the highest, it is best to borrow from a lender offering lower rates and shorter terms. Banks also provide the lowest interest rates to customers with excellent credit.

To learn more about personal loan interest rates, visit Piramal Finance. You can also explore their products and services.