5 Simple Tips to Get Better Interest Rate on Personal Loan

Every salaried or self-employed professional will have instances where they will require finances and would be on the lookout for multiple financing options to avail loans. While there are numerous options available to borrow, you need to go for a type which is best suited for your requirements. Loans are categorized mainly into two types - secured and unsecured.

If you do not have any property/asset to pledge with the borrower, it is termed as unsecured loans as the bank/NBFC consider this as a risky transaction. Unsecured loans have faster processing, higher interest rates, etc. One of the most popular unsecured loan types is a personal loan, but still many feel that PL have higher interest rates, thus establishing a difficult repayment phase. All of these loan types have different pros and cons depending on your situation, so it's always best to read up on them to make sure you go for the one that suits you.  

Personal Loan: How To Avail Lower Interest Rates?

Personal loans carry various benefits for the borrowers but do have higher interest rates. As a borrower, you can go for the loans with lower interest rates through the following recommendations:

Having a good credit score:

A credit or CIBIL score is nothing but determining the creditworthiness of the individual who has opted for a financial obligation. The banks/NFBCs who have received the loan application would first check the credit score of the borrower before proceeding with other formalities. A CIBIL score would be somewhere between 300-900, and any score above 700 is considered an excellent rating to gain the confidence of the lenders. Hence you should pay off the existing debts which will increase your credit score. An improved score can empower you to negotiate with your lender to lower the personal loan interest rates. 

Comparing multiple lenders:

Due to the increase in demand for personal loans, many financial institutions are ready to provide such kinds of loans. Such a move can help a borrower to choose between various lenders based on the personal loan interest rates offered by the lender. However, you should not be applying to every bank/NBFC at the same time as multiple lenders will refer to your credit score, which is not advisable. Instead, you can use the online EMI calculator to know about the prevailing rates in a financial institution and decide accordingly. The online EMI calculator would provide you with the interest rates, tenure and monthly EMI so that you can plan your repayment phase accordingly. 

Employer influence:

The bank/NBFC would usually decide the interest rates based on the employer of the borrowing individual. Tier 1 companies’ employees would have better interest rates compared to other tier companies which are also because of an association between the lending institution and the company. There are also instances where the employer can ask the lending institutions to provide loans at a lower interest rate to their employees. Hence one can avail better interest rates based on their tenure with the company.

Applying during seasonal offers:

Almost every bank or NBFC would roll out lucrative offers during the festival seasons or other significant days. The proposal would typically provide lower interest rates, and one can make use of the offer to avail lower interest rates. Since personal loan interest rates are fixed, the lender cannot make a change in the repayment details in the future. Thus the festive seasons are a great time to apply for such loans.

Contacting a known lender:

If you had already applied for a loan with a lender, you might be suitable for pre-approved loans which are more comfortable, quicker and mostly carry better interest rates. The lending institution also tries to retain the borrower by offering better benefits for the new loans. Hence, you can leverage the benefits and get lesser interest rates with your existing lender. Note that your current lender would be analyzing your repayment phase and would come up with seasonal and pre-approved loan offers based on your repayment history. You can also top-up your existing loans and negotiate with the lenders for lowering of interest rates which can benefit your repayment phase.

Conclusion

Having a good credit score, maintaining a good association with a lender would naturally increase your chances for a personal loan with a lower interest rate. Hence, you would need to work on the recommendations mentioned above for a hassle-free approval process.