When you avail a personal loan, you can repay the amount in flexible tenure. The lender determines your EMI after considering your chosen tenure, financial profile and credit score. However, one more factor that significantly affects your repayment amount and EMI is the personal loan interest rate. If you get a higher interest rate, your interest outgo and cost of borrowing will be higher and vice versa. Though the lender determines the interest rate, you can get the best rates through a few methods.
Methods to Get the Best Interest Rates on a Personal Loan
- Choose lender carefully
As explained above, the personal loan interest rate is decided by the lender. Therefore, you must choose your lender carefully. It’s true that you must check the interest rates offered by the lender. However, you must also check their processing fee and administrative charges. You must compare lenders to find out who is offering the best interest rates. As everything is digital, you need not visit the branches of lenders to find the details. You can just visit their website to find the interest rates and other offers provided by each of them. Research different lenders and then use an EMI calculator to know which lender is offering you the best interest rate.
- Maintain a high credit score
A high credit score implies that you are creditworthy and have paid your EMIs timely in the past. Having a high credit score reduces the risk for the lenders, making them offer you a lower rate of interest. Before applying for the loan, you must review your credit report and check your credit score. You must apply only when your credit score is more than 700.
To improve your credit score, you must pay all your EMIs and credit card bills on time. Also, you must keep the debt utilisation ratio low. While checking the credit report, if you find any discrepancy, ensure to request the bureau to rectify the mistake.
- Approach your bank
When you start researching lenders for a personal loan, contact the lender with whom you have a past relationship. Often lenders offer preferential interest rates to the existing lenders if they have had a timely repayment history and good relationship with the bank. Moreover, you can also negotiate the interest rates with the lenders by leveraging your credit score and financial profile.
- Financial profile
If you have a high income, you are more likely to get low loan interest rates. It is because a higher income level translates to having enough money for repayments. If required, you can opt for a joint personal loan to enhance your eligibility. Moreover, you should avoid changing too many jobs as it reflects an unsteady source of income.
You can use these tips to get the best interest rates on a personal loan. However, ensure that you read the fine prints carefully to uncover any hidden cost. Apply for personal loan today.