April 22, 2024

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5 tips to get a low personal loan interest rate

low personal loan interest rate

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Personal loans are a quick financing solution to cover different planned and unplanned expenses, whether you want to fund a much-needed trip, have unpaid obligations, or are dealing with a medical emergency. Because of its easy application process, minimal documentation, no collateral, and quick approval, borrowing is more affordable than ever.

But for anyone considering taking out a personal loan, one of the primary concerns is the Equated Monthly Instalments (EMIs) thatyou need to pay monthly. And getting a low personal loan rate is a major priority as the lower the interest rate, the less you will have to pay back in total.

Interest rates on personal loans can vary depending on the lender’s criteria and the borrower’s creditworthiness. However, some tips can help borrowers get the best rate possible. Here are five of the most helpful tips:

1. Choose the right lender

Lenders set specific personal loan eligibility criteria that borrowers need to fulfil to qualify for a personal loan. Thus, check the eligibility requirements of different lenders and compare thoroughly to find a lender with easy criteria and competitive interest rates. Also compare additional costs like foreclosure charges, processing fees, etc., and avail a personal loan from the lender with whom you have a long-term relationship to negotiate for better interest rates.Also compare additional costs like foreclosure charges, processing fees, etc., and avail a personal loan from the lender with whom you have a long-term relationship to negotiate for better interest rates.

2. Maintain a good credit score 

A personal loan is unsecured and not backed by any asset as security. That makes your credit score an important parameter of your creditworthiness and assurance for the lender. If you have a good credit score, you can get a personal loan with a lower interest rate. With a poor credit score, you may still get a personal loan but may have to pay a higher interest rate. Many experts recommend following smart financial habits such as paying your bills on time and maintaining a low debt-to-income ratio to maintain a healthy credit score.

3. Apply for the right amount

Most financial institutions offer a personal loan EMI calculator on their website to help borrowers calculate the EMI amount beforehand. You can calculate the EMIs by entering the required loan amount, interest rate, and repayment tenure in the calculator. This free online calculator can be used multiple times to compare different lenders, and you can choose the right loan amount with the minimum EMI value.

4. Use your professional network

If you have a stable job with a reputable company, mention this when you apply for a loan. Many companies have good banking relationships with financial institutions, and if you work in one of them, you may use your company’s reputation to negotiate a lower personal loan interest rate.

5. Mention all your income sources

Try to include all additional sources of income besides your salary, such as investments, rental income, and dividends. The more income you have, the more the lender will be convinced that you can make regular loan payments, thus improving your chances of getting a personal loan approved at better interest rates. Note that the lender may ask you to produce income proof like income tax returns for verification.

Interest rates on personal loans can vary significantly, so even a small difference in interest rates can add up to big savings over time. Thus, understanding the above-mentioned tips and practices to get better interest rates is important so that you can confidently click on the personal loan apply button.