Obtaining a personal loan may often be a source of optimism during times of acute financial need. Such loans, noted for their adaptability, may come in handy for a variety of reasons, including managing wedding expenditures, funding a dream vacation, reducing debt, and dealing with medical problems. The key to making the most out of a personal loan without being overloaded is to better understand and assess crucial parameters, the most essential of which is the rate of interest. The rate of interest on your personal loan impacts your thorough borrowing cost, which directly affects your month-on-month payments and overall interest paid during the loan’s repayment duration. Thus, obtaining a loan at a reduced interest rate is not only financially prudent but also necessary.
Personal loan rates normally differ anywhere between 10.99 per cent and 20 per cent per annum. A “good” rate of interest is highly dependent on the lender’s policy, market conditions and your credit profile. However, a good rate is often the one that is on the lower side of the spectrum, guaranteeing affordability and lowering financial stress.
To fetch a lower interest rate on a personal loan, ensure to follow the below-mentioned strategies –
⮚ Maintain a strong credit score
Your credit score is a numerical indicator of your creditworthiness that is impacted by your previous and current credit actions. Lenders use this credit score to examine the risk of lending to you. A credit score of 750 or above increases your chances of getting a loan with a low-interest rate. To enhance your credit score, check your report on a regular basis, pay your outstanding dues in full and on time, and keep your credit utilisation ratio below 30 per cent.
⮚ Negotiate with existing banking relationships
If you hold a positive and longstanding relationship with a financial institution, leverage it. Your loyalty may earn you a more favourable interest rate. Banks often offer lower rates to existing customers with a good transaction history to retain them.
⮚ Compare amongst loan deals
Never settle for the very first loan offer that comes your way. Compare amongst distinct loan deals to zero in on the offer available at the lowest rate of interest. For this, utilise an online personal loan EMI calculator available on financial platforms to understand the EMI breakdown and total interest payable across different interest rates. This comparison will not just endow you with a better understanding of the market but even permit you to negotiate for better terms.
⮚ Opt for a shorter loan repayment tenure
While lower repayment tenures infer higher loan EMIs, they considerably lower the overall interest constituent paid throughout the loan duration. Lenders might even provide lower rates for shorter repayment durations as it lowers their credit risk.
Final thought
While a personal loan serves as a quick financial fix, the wisdom of opting for a suitable one depends on in-depth research and comparison. The advantage of instant liquidity must not cloud the judgement in evaluating the borrowing cost. Always ensure to utilise an online personal loan calculator to get a thorough overview of your financial commitments and avail a loan deal at the lowest possible rate of interest. Note that a well-negotiated personal loan can be the financial bridge you need, provided you cross it with caution and informed decision making.