Personal loans are one of the best ways to address a host of financial emergencies. Being unsecured, this financing option is quick and easy to avail. Moreover, with no end-use restrictions, individuals can address all their financial obligations at ease.
Subsequently, reports state that personal loan disbursals have increased 3.8 times by volume. However, since they are collateral-free, it may be difficult for borrowers to get the lowest rate personal loan. But it is not impossible. There are a few ways one can increase his/her chances of getting a personal loan at a competitive interest rate.
Ways to get the lowest rate on a personal loan
Prospective borrowers can follow the tips mentioned below to avail of a personal loan at the lowest interest rate:
Improve/maintain the CIBIL score
The CIBIL score or credit score indicates a lender about a borrower’s creditworthiness. It ensures the lender whether the individual will repay the loan amount in the given tenor or not. Therefore, the credit score is the most crucial factor that determines personal loan interest rates.
A high credit score of 750+ can lead to a competitive interest rate, whereas a low score can significantly increase the same.
Therefore, borrowers must know how vital a CIBIL score is for personal lending and include some healthy credit habits, like:
- Making timely payments
- Avoiding too many loans at the same time
- Maintaining a healthy mix of credit
- Regularly monitoring the credit score
- Ensuring a lower credit utilization ratio of less than 40%
Maintain a low FOIR
Lenders decide the lowest rate on a personal loan after considering a borrower’s monthly income. This helps them calculate the repayment capacity of the borrower. A high FOIR above 60% informs the lender that one’s disposable income is less.
In such circumstances, most lenders reject the loan application or levy heavy interest rates. Therefore, it is extremely crucial for buyers to keep their income sources steady and maintain a low FOIR.
Opt for a shorter loan tenor
A shorter loan tenor means high EMIs and a lower interest rate. So, individuals with a steady monthly income who are willing to spend more on EMIs can opt for a shorter loan tenor and get the lowest personal loan interest rates.
However, borrowers must know how to manage their personal loan EMI repayment efficiently. Remember to opt for a tenor that suits one’s repayment capacity.
One can also use a personal loan EMI calculator online and get accurate, swift, and easy EMI calculations.
Meet/exceed the eligibility
Borrowers are also required to fulfill specific eligibility parameters before availing of a personal loan. Meeting or exceeding these parameters can also assure reasonable interest rates. A few essential eligibility criteria common to all lenders are:
- Applicants must be 20 to 60 years old
- Must be employed at a reputed private or public limited company or an MNC
- Must be an Indian citizen, residing in India
Exceeding these criteria can also open the scope of negotiation with the lender, which may potentially provide one with the lowest rate on a personal loan.
Compare different offers
Interest rates on personal loans may vary according to lenders. Therefore, borrowers must compare different offers extended by various lenders. Further, to simplify the process, they can use an interest rate calculator. This online tool will help them in determining the most affordable borrowing options.
Moreover, leading financial institutions like Bajaj Finserv provide pre-approved offers for existing customers. These offers are crafted to make the application procedure hassle-free. You can check your pre-approved offer by entering your name and contact number.
Add your professional details
Borrowers working at a reputed organization with an impressive salary are considered stable by lenders. Such borrowers can add their professional credentials and negotiate the interest rate. The company’s reputation may lead the lender to lower the interest rate, given the individual’s creditworthiness.
The above-mentioned tips can help one get the lowest rate on a personal loan. However, individuals must also note that some lenders charge hefty processing fees and an increased prepayment penalty, which may affect the overall cost of borrowing. Therefore, borrowers must consider all these factors before deciding on a lender.
Read Also: Know How To Avail Of A Personal Loan Using Aadhaar Card