The personal loan segment has escalated by 2.3 and 3.8 times in terms of value and disbursal from FY2017 to FY2021. The increasing popularity of this credit option rests on the availability of instant funds, helping individuals address their monetary requirements.
Moreover, the no-end-use restriction is another notable reason the Indian personal loan market has seen significant growth. However, borrowers must opt for the lowest personal loan interest rate for the credit option to be functional and cost-effective. Even a slight change in the interest rate has a consequential impact on the total cost of borrowing.
Know The Ways To Get The Best Personal Loan Interest Rates
Searching for the best personal loan interest rate will help them curb loan expenditure to a great extent and manage other financial obligations effectively. Hence, borrowers must have an idea regarding the below-mentioned factors that will help them get the best personal loan interest rates-
- Compare personal loan interest rates: Different financial institutions are offering different interest rates. Before settling for a lender, borrowers must compare varied interest rates as extended by different lenders and choose the one that is affordable and best suits their finances.
- Meet eligibility criteria: Borrowers can only avail of a small personal loan if they adhere to the eligibility criteria. One of the significant aspects of the eligibility parameter is income status. Income status helps determine a borrower’s repayment capacity. A borrower with a stable source of income is considered to have a timely repayment capability and hence is offered a lower interest rate. Even a borrower with lengthy employment history has the chance to get a lower interest rate.
- Maintain a decent credit history: A credit score is the numerical summary of a borrower’s credit behaviour. Lenders are likely to offer lower interest rates if the borrowers have a healthy credit score. A score of 750 and above is considered ideal, suggesting that a borrower is responsible for repaying the loan on time. However, a borrower with a substandard CIBIL score must know certain things to improve their personal credit score and then try to apply for the credit option.
- Avoid missing out on repayments: Borrowers willing to avail of the best personal loan interest rate must have a good repayment record. Paying out the EMIs and dues on time builds the repayment record of an individual and makes them reliable, helping them negotiate for a better interest rate. To make the loan repayment hassle-free, borrowers must use a personal loan calculator.
- Opting for a balance transfer: One of the effective ways to get the best interest rate is by opting for a loan refinancing. A balance transfer facility enables borrowers to shift the outstanding loan principal to a new lender offering a better lending rate.
- Keep a healthy debt-to-income ratio: Borrowers can fetch a modest interest rate by maintaining a decent debt-to-income ratio. If the maximum income of a borrower goes into clearing off debts and other monthly liabilities, lenders will be less likely to extend lower interest rates. Hence, there must be a balance between the borrower’s gross monthly income and expenditure. Besides striking a balance, a borrower should know the mistakes to avoid when it comes to repaying debt.
- Disclose additional sources of income: Revealing additional sources of income like any investments, rental earnings, etc., helps borrowers enhance their credibility and receive the best personal loan interest rates.
- Keep an eye on offers: Borrowers must look out for offers and deals that financial institutions roll out from time to time. These offers help one get a competitive interest rate. Borrowers will receive more such offers if they have a decent credit history. Even certain schemes help women and salaried individuals avail of a competitive interest rate on their loan principal.
Furthermore, existing customers who have healthy ties with their lenders can try negotiating with their lenders for nominal interest rates. However, they need to have a good credit score and repayment history.
Moreover, borrowers must look for exclusive pre-approved offers extended by financial institutions on personal loans, business loans, credit cards etc. These offers help borrowers receive better lending rates and expedite the lending process. Willing borrowers can check their pre-approved offers by submitting their names and contact details.
To sum up, personal loans have stirred the credit landscape of India. However, before going ahead with the financing option, borrowers must focus on the personal loan interest rates as it helps determine the feasibility of their repayment within the loan tenor. Hence, borrowers must opt for affordable personal loan interest rates to minimize their loan expenditure, helping them tide over the entire repayment period easily.
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