Personal loans are one of the most popular financing tools that you can consider to fulfil your funding needs. Be it buying a high-end gadget or splurging on your wedding, financing your dream trip, or paying your medical bills, a personal loan comes in handy. They are unsecured loans that can be availed with simple documentation and easy processing. However, the only thing that keeps many people from availing a personal loan is its interest rate. Because personal loans are unsecured loans the interest rates on such loans may be a bit higher.
The interest rate is one of the most crucial parameters that you need to consider as a borrower while applying for a loan. The higher the interest rate, the higher will be your EMI burden and the more will be your payback. This can make your entire experience very expensive. Thankfully, there are a few pro tips that can help you get the best interest rates.
4 Pro Tips to Get the Best Interest Rates on Personal Loans
Here are four pro tips for you to get the best interest rate on the loan.
- Adjust your loan amount or duration: This is one of the simplest ways to get the best interest rates on a personal loan. Many lenders have a compartmentalised interest system where interest is generally based upon the bracket in which the loan amount is placed. See, when a company lends you money, they consider various aspects of the deal. If you are looking to borrow a higher amount and you opt for a longer loan tenure, the loan provider will lend you the loan at an increased interest rate. This is because when you increase the time or money, the risk associated with your loan account also increases. To compensate for this risk, the provider increases its interest rate. If you think you are being charged too much interest rate, you can consider applying for a lesser loan amount or you can lessen the loan tenure. This will place you in a lower bracket which will make it possible for you to get the loan at a lower interest rate. Some companies do disclose the interest rate brackets beforehand but if your lender does not, you may have to enquire about this specifically.
- Maintain a high credit score: A good credit profile is the single most sure-shot way to ensure that you get the best possible interest rates. When you apply for a personal loan or any other loan, the lender carries a background check with a credit bureau. There are multiple credit bureaus that keep a tab on your borrowing history. The number of times you have applied for a loan, the number of defaults, the number of open loan accounts, and such other details can be obtained from a credit bureau. Based on your credit history, the credit bureau will assign you a credit score. This is generally a three-digit score ranging between 300 to 900. A person who has always made their payments on time will have a higher credit score and is termed a responsible borrower or low-risk borrower. Thus, they are extended the best deals in terms of how much they can borrow as well as what interest rates they have to pay. So, before you apply for a loan, check your credit score and try to improve the score by repaying any pending debts.
- Borrow from an online cash loan app: There are many lending channels in India from which you can get a personal loan. Conventional lenders hold the lion’s share in the market because of two main reasons, they are present in a lot of places, and they have been in the business for a long time. However, conventional lenders also have their own limitations. First, they are very highly regulated and thus mostly unable to innovate, and second, their operational costs are too high because of the widespread physical presence. The ray of sunshine is to borrow from an online cash loan app. This is a new age technology-enabled lending model which has many advantages over conventional lending institutions. Being app-based means they are present practically everywhere yet do not have the high operational costs of traditional lenders. Their application and loan processing are all computerised with minimal human intervention. All of this allows you to be able to borrow money at much lower interest rates. Moreover, being online also means that they are open for business all the time.
- Negotiate and do comparison shopping: This is obviously the best and time-tested way to get the best deal on personal loan interest rates. You can check for offers on loans from various lenders and find out who is offering you the best possible deal. While in the case of conventional lenders you would have had to visit the branch or office of every lender on your own which obviously requires a lot of time and effort, an online cash loan app completely solves this problem. Simply install apps from reliable sources and check where you are getting a good deal. Many apps also allow pre-sales support in which you can chat to negotiate lower interest rates. Obviously, you will have to spend your time and effort on this, but it is a lot simpler, faster, and less exhausting than having to visit multiple physical locations and haggling in person. In addition to this, you can wait for the festive season when most financial institutions launch their promotional offers. You can get the best interest rate during this time.
When borrowing, make sure that you have done all the necessary due diligence before you sign the dotted line. While checking for the interest rate is important, it is equally important to check other associated costs or charges with the loan. You must also check the quality of customer support and reviews from existing customers. How they resolve discrepancies is equally important. Do not conclude a deal unless you are sure about all these aspects. If you are borrowing from an online cash loan app, make sure to check that they have at least one physical branch. Always pay back the loan on time to avoid penalty charges and keep your credit score high. Finally, negotiate hard and do as much comparison shopping as you can!