Loan interest rates are largely influenced by the Reserve Bank of India’s interest rate. However, when you look for a personal loan, you will find a variety of lenders offering different rates of interest. There are attractive personal loan offers available everywhere. Whether you are eligible for the best offer would depend on your credentials as a borrower and your eligibility. To make sure that you get the best deal the next time you apply for a personal loan, here are a few tried and tested tips that you can try to stick to.
Maintain a good credit score
Anyone with even little knowledge about the loan market will tell you how important your credit score is. Independently measured by entities like CIBIL, lenders rely on the credit score to measure your credit standing. To maintain a high credit score, you have to pay your EMIs on time and avoid defaults in your credit card bills. A credit score can go up to 999, but anything above 750 is considered to be respectable. The higher your credit score, the better are your chances of getting a lower personal loan rate of interest. The lender also takes a look at your credit score while deciding your repayment terms and your loan amount.
Compare, compare, compare
Gone are the days when you would approach your banker and avail of the personal loan that they are offering. Now you can compare all the personal loans available in the market, either by using an aggregator or visiting individual websites. Do note that the interest rate should not be the only criteria for selecting a lender. Luckily you can compare lenders online on a variety of other parameters, like loan amount, repayment terms, processing fees, foreclosure charges, etc.
Leverage your professional credentials
You can use your professional standing to your advantage to get a favourable rate of interest. If you work for a reputed employer and draw a decent salary, lenders may be keen to offer you a lower rate of interest. You can approach the banker who has your salary account or your employer’s preferred bankers and financial institutions for liberal personal loan interest rates.
Look for offers
There are seasonal offers like a low-interest rate for a limited period, zero processing fees, pre-approved loans, etc. You should check if any such offer is available at the time of your loan application. Festive offers and lower personal loan interest rates for online/app-based applications are examples of such special offers. Besides, you should also check if you have any pre-approved loans with an attractive interest rate offered by your banker.
Close existing debts
If you can close your existing loans before applying for a new personal loan, you stand to clinch a better loan deal. Your debt-to-income ratio becomes healthier in the absence of existing debts. For instance, if your debt-to-income ratio is higher than 50%, you are considered to be a person with a substantial debt burden. In such a scenario, your repayment capacity comes under scrutiny in the eyes of the lender. This may increase your personal loan interest rate, which inflates the EMI, as can be checked on any personal loan EMI calculator.
As you can see, you can do your bit to tilt the personal loan interest rate in your favour. With good financial planning and preparation, you can shortlist the lenders who are offering the best personal loan deals. After interacting with them, you can finalise the personal loan product that has the best interest rate and has favourable terms and conditions.