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.
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.
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