Techniques to Get a Low Interest Rate on Your Personal Loan!
A personal loan is a key to your financial freedom. These loans come with extreme flexibility and convenient accessibility, making them easy to avail, manage, and repay quickly. You may need to meet a handful of eligibility requirements set by your lending institution and complete the paperwork with minimum documents to avail of an instant personal loan today. You can also help with the loan in high value to easily meet your diverse financing needs and repay it conveniently in easy EMIs over an extended tenure. Typically when availing of a personal loan through a reputed instant loan app, you can help with the financing up to Rs.1.5 Lakh with ease against the proper eligibility fulfillment. These features and facilities make a personal loan a great financing option.
Given that lenders provide these loans with zero asset security also makes them preferable to borrowers as they do not freeze their assets. However, the absence of any collateral also subjects the lender to a high lending risk. For this purpose, the interest rates on personal loans are usually higher than those on secured loans. Not to say that it makes these loans affordable, as you can always employ various ways to help bring down the overall cost of your loan.
Here are some useful techniques to get a low-interest rate on your loan.
Ways to Secure a Low Rate of Interest on Your Loan
Work on your credit score
Your credit score serves as the first face of your creditworthiness to the lender, allowing them to assess if and how much they should lend you. A high credit score means you are a responsible borrower, and the lender is more likely to get the payments on time, while a poor credit score flags the lender to be cautious about your repayment behavior. Even though some instant loan apps do not make it mandatory, having a high score can help you get better interest rates.
So, before you apply for a personal loan, make sure to check your credit score. You can easily check your credit score online with the help of your PAN card number. If your credit score is not in the green zone, you can take the necessary steps to improve it. Pay off some of your existing debts, do not apply to multiple lenders, and check with the bureau that all your details are correct.
Compare the lending institutions for the best loan offer
One great way to get the best rates on personal loans is to compare the rates offered by different lenders. It should help you determine which lender provides the best rates on loans.
Download an online loan app and check the interest rates; often, the interest rates offered by these apps are lower than that of traditional lenders. This is because of the low operational cost of these Fintech companies. Once you know the best rate that you can get, you can also negotiate with your lender and get a better interest rate.
Keep your EMIs affordable.
While opting for a personal loan, the most important thing you must check is the EMI you must pay to the lender every month. The EMI of your loan depends on three things – the principal amount you borrow, the tenure of your loan, and the interest rate.
Extending your loan tenure is the simplest way to bring your EMI down. Since the interest rate is not under your control, you can adjust the principal amount and the loan tenure to get an EMI that can easily accommodate your monthly salary. However, longer tenures also mean higher interest payouts. So, do not opt for the maximum tenure option. By adjusting your loan tenure, you can use an online EMI calculator to check the most affordable EMI.
Work for a reputed organization.
The company or organization you work for affects your loan interest rates. Individuals working in the government sector or multinational companies often get better deals on interest rates as compared to professionals, business people, or employees working with small companies. This is because of the assurance of high job stability and regular salary that comes with these big corporations.
So, if you are considering switching your job, consider these points too. A start-up might offer you a better salary and greater challenges, but working for an established company has perks.
Keep your FOIR in check.
Your FOIR or Fixed Obligation to Income Ratio represents how burdened your monthly income is based on the fixed monthly liability you need to service. When calculating FOIR, know that this percentage considers your new EMI liability to be created for loan assessment. You need to keep the FOIR under 50% to get the best rates on your loan.
Apply under your maximum borrowing capacity
Even though you may be eligible for a high loan amount, applying for a financing value lower than your maximum eligibility is smart. This is because it helps reflect a high-income threshold, reducing the lender’s risk and allowing them to offer low rates on these instant money loans.
Apply during the festive offers
If your need for a personal loan is not urgent, you better wait for the festive season. With many lenders offering instant personal loans, many come up with festive offers and promotional deals to gain an edge over the competition and onboard new customers.
Many high-end products also see heavy discounts during this season. So, planning it during the festive season can bring extra perks, whether a home appliance or an electronic gadget, wedding shopping, or travel aspirations.
Go for a secured personal loan.
Personal loans have high-interest rates because of their unsecured nature. These are high-risk loan instruments, and len levy higher interest rates on personal loans than home loans or car loans.
You can opt for a loan against FD or a personal loan against the mortgage to get a loan at lower interest rates. This way, you do not have to pull out your investments before maturity and get the necessary funds to fulfill your financial needs.
Choose your interest rate wisely.
While availing of a personal loan, the lender may offer you a floating or fixed interest rate. With a floating interest rate, your EMI might not be selected every month as the interest rate would vary per the market rate. But there are a few perks of opting for floating interest rates.
If you wish to foreclose your loan, there is no foreclosure fee on loans with floating interest rates. Also, a decreased interest rate can reduce the actual cost of your loan. Typically, floating interest rates are 1% to 2.5% lower than fixed interest rates.
Getting a personal loan at a low-interest rate can help you save big over the tenure of the loan. There are many ways in which you can negotiate with your lender and get a loan at a competitive interest rate. Make sure you compare different lenders before choosing the one best fits your requirement. However, remember not to apply for a loan with multiple lenders at once, as this negatively impacts your credit score.
If you have an existing loan that you opted for at a high-interest rate, you can still reduce the interest rate. You can either negotiate with your current lender or opt for a loan transfer.