Tips for Getting Lower Personal Loan Interest Rates

by Arjit Chalmela Finance Student

You cannot predict emergencies. Hence, when they occur, they leave you financially distressed. To combat the after-effects, you must seek external assistance. This is where credit options come to the rescue. Multiple choices cater to different purposes. Examples include financing for a Home, Car, Travel, Business, etc. But they restrict you to a specific use. Also, they require collateral.

A Personal Loan rises above these limitations. It is unsecured. Hence, there is no collateral requirement. Also, there is no restriction on its end-use. This makes it convenient and affordable for everyone. You get to use it for both planned and unplanned use. You get to avail of these benefits in return for an interest rate. Even a slight increase in its percentage affects your repayments. Hence, consider these tips:

Fix Credit History

A high credit ranking is required to meet the eligibility criteria set by banks. This is because they emphasize it to judge your financial health. It is an indicator of your repayment history and credit behavior. Hence, it is best to fix any errors in it before applying. Having a higher rating enables you to negotiate a better interest rate.

Increase Income

Your monthly salary or turnover is considered the default income source. Additionally, you can include any additional revenue from rent, investments, etc. This reduces the lending risk enabling loan providers to offer low-interest rate Personal Loans. If you lack extra earnings, create them before loan application to get affordable rates.

Shop Around

Many banks offer competitive interest rates. Hence, researching is the best way to lower your borrowing cost. For this, you visit their site and read their policy. Using their tools to check eligibility and equated monthly installments also gives you an idea. It may take time to compare, but getting affordable interest is worth the effort.

Estimate Interest

There are two interest computation methods – flat and reducing rate. The former calculates interest on the entire principal amount, and the latter focuses on the outstanding amount. This affects how much you pay in repayment. You should check for this with the bank even if you get low interest. You should also choose wisely between floating and fixed interest types while opting for the Loan.

Make Flexible Choices

Being practical with the terms is another way to get the best rates. You should consider alternate possibilities if you are fixated on a borrowable amount, tenure, or rate. The best way is to use an EMI calculator. See how your chosen variables affect the interest payable. Change them until you get the desired outcome.