Personal loans play a key role in helping millions fulfil their aspirations. These are the most sought-after financing options as they can be easily obtained due to their simple eligibility criteria. Online application and minimum documentation help in the quick disbursal of big amounts. Both salaried and self-employed individuals can borrow without providing any collateral to meet their long-term and short-term needs. These may range from essential property repairs, debt clearance, weddings, travel plans, higher education, and medical emergency.
Some worry that personal loans may have a higher interest rate, as they are obtained without any asset security. The good news is that there are some ways to secure low interest personal loans to ensure a smooth cash flow without disrupting your lifestyle. Here’s a look at a few simple ways to get the best rate.
Good Credit Score
The interest rate on personal loans depends to some extent on the applicant’s profile. The higher the credit score, the better are the chances of getting the lowest personal loan interest rate. Therefore, try your best to:
- Clear all utility bills on time
- Maintain credit utilisation ratio within the 30% limit
- Ensure a clean credit repayment history
- Maintain a mix of secured and unsecured loans
Make sure your credit score is between 700 and 900, as this will make you the best candidate to secure loans at more attractive rates.
Low interest personal loan eligibility might depend on your job status. If your organisation and employer have high credibility, this inspires more confidence in your ability to repay the loan. This is because working for a reputed firm usually means financial stability.
Know the Interest Calculation
Use a personal loan calculator to understand the repayment of interest and principal amount. This is important since lenders might have different calculation methods:
- In a reducing interest rate loan, the payment is calculated on the outstanding principal.
- In a flat rate, the payment is calculated on the full amount.
Choose the reducing interest rate option to avoid paying a higher rate at the end of the tenure.
If you have a good rapport with the bank, you might be offered better service terms. This is one of the policies to retain premier customers and maintain a life-long relationship. In such cases, the lending bank is already aware of your credit score and profile. For example, they know the salary you draw and have access to your previous EMI and other payments. This makes it easy to disburse funds at affordable rates.
Further, make sure you do not have too many existing debts. This way, you might reduce your chances of getting a personal loan at a low interest rate.