Securing the most favourable interest rate is paramount when seeking a personal loan. A low-interest rate not only grants you the benefit of borrowing but also safeguards you from burdensome debts in the future. Understanding the necessary steps becomes crucial to unlock the potential of availing the best interest rate on personal loans. This post will discuss all about acquiring the best interest rates on personal loans.
Types of Interest Rates Offered on Personal Loans
When applying for personal loans, you must decide whether to opt for fixed or floating interest rates. Let’s have a look.
- Fixed Rate of Interest
Under this, your interest rate remains constant, and EMI remains the same throughout the loan tenure. You may be charged a fee if you go for prepayment or foreclosure of your loan.
- Floating Rate of Interest
Under this, your interest rate fluctuates during the repayment tenure, and the interest rates are linked to MCLR (Marginal Cost of Funds based Lending Rate). Usually, there is no fee charged on repayment of these loans.
How Can You Earn Low-Interest Rates?
Finding the best interest on personal loans starts with ensuring you can avail of them. Various factors determine the interest rates that you can get. Here are a few things you can do to get the best low-interest rates on personal loans:
- Maintain and Check Your CIBIL score
CIBIL score plays a deciding factor in determining an interest rate. High creditworthiness means you can gain low-interest rates if it varies across institutions. If your CIBIL score is low, you may still get a personal loan approved. However, the rates of interest could be higher.
That’s why when looking for the best low-interest rate on personal loans, ensure a good credit score.
Additionally, always keep your CIBIL report updated. You must check your CIBIL score before you fill out your personal loan application to avoid rejections. And if you are wondering, “Does checking the CIBIL score reduce it?” The answer is no, instead, it helps you to have a clear picture of your credit health. You can use the OneScore app and get your credit score and report for free.
- Check Your Eligibility Criteria and Documentation
Before applying for personal loans, always check if you have the right documentation available and meet all conditions. Your personal loan interest rate depends on your employment, age, income, employment type, and repayment capacity.
Remember to provide accurate information and every document required in the loan-getting process. Eligibility is a vital gateway to ultimately getting the loan. Hence, if you meet all eligibility conditions, there are higher chances of getting the desired loan amount at low-interest rates.
- Look for Flexible Loan Tenures
Personal loans that come with flexible tenures are always an advantage. Using an online personal loan EMI calculator, you can work your interest charge based on different loan tenures. The lower your term, the lower will be the overall interest charge. However, in such cases, the EMI will be higher.
On the contrary, opting for a higher loan tenure ensures a long-term relationship with the loan provider and, thus, higher chances of earning a low-interest rate offer.
- Keep Your Credit Utilisation Ratio (CUR) Low
It works if you have and use a few credit cards. Generally, keeping your CUR below 30%-40% depicts your sound repayment capacity, non-dependence on credit, and proper use of available funds.
- Maintain a Good Relationship with the Loan Provider
If you are an existing customer of a financial institution, then they will provide you with the best low-interest rate on personal loans. A current relationship with the lender gives you credibility.
- Stability in Employment and Income
It is one of the critical parameters to consider when taking a personal loan. Stable employment or business with a steady source of income makes you eligible for a personal loan at low-interest rates. Knowing your stable income source will make you a credible borrower if the lending financial provider knows your steady income source.
Key Parameters That You Must Consider Besides Interest Rates
Interest rates are not the only factors you must consider when applying for personal loans. It would help if you looked at other factors like:
- The credibility of the loan provider
- Additional fees and charges
- Customer service
- Ease of application and documentation
- Eligibility criteria, loan amount, and flexible loan tenures offered by the loan providers.
Conclusion
Whether salaried or self-employed, you must be well informed to get the best interest rate on a personal loan. Do your research, and keep the factors mentioned above in mind when you’re looking for low-interest rates on a personal loan.
