A personal loan can be used for any personal expense such as financing a wedding, paying for academic expenses, taking care of a medical bill, and so on. While this loan can be very useful, some borrowers are worried about getting stuck with a high interest rate. However, this does not necessarily have to be the case as there are ways in which one can lower the interest rate of their personal loan.
Here are a few effective tricks that can help in getting a lower personal loan interest rate:
- Keep a decent credit record
Any financial institution will check an applicant’s credit score before offering them any type of loan. This is why it is so important to first make sure that your credit score is up to the mark before you apply for a personal loan. Since lenders prefer borrowers to have a decent credit score, they offer better deals on personal loans, such as a lower interest rate or higher loan amount. To get a lower personal loan interest rate, it is advisable to maintain a credit score of over 750.
- Focus on your professional credentials
Any financial institution would prefer their borrowers to be able to easily repay their loans. Now, this would be possible when the borrower works for a good organisation and earns a decent monthly income. This lowers the lender’s risk, which is why they can offer competitive interest rates to such borrowers. So, earning a high monthly income while working for a reputed company can go a long way in improving your chances of getting a lower personal loan rate.
- Keep a clear loan repayment record
Financial institutions also take a look at an applicant’s previous history of clearing loans. If they have a record of frequently defaulting on loans or delaying EMI payments, it could cause problems for their loan approval, or they could get stuck with a high interest rate. To get a low personal loan rate, it is better to keep a clear repayment record.
- Maintain a good banking relationship with the lender
It becomes much easier for an applicant to be offered a good loan plan if they already have an existing relationship with the lender. Having a savings account or a fixed deposit with the financial institution improves the applicant’s chances of getting a lower interest rate.
- Keep an eye out for seasonal deals
Lenders are always competing with each other when it comes to winning more customers. This is why financial institutions are known to keep coming out with seasonal offers on various loans. These are limited period offers to win more customers. Now, these offers could prove to be lucrative deals for a personal loan borrower. Make sure to stay updated on seasonal deals that are offered by lenders to get a lower personal loan interest rate.
By keeping these tips in mind, it becomes very easy for a borrower to get the best interest rates on personal loans. It is also advisable to make use of a personal loan EMI calculator to understand how the interest rate affects EMI payments. This way, it becomes possible to know whether the interest rate being offered by the lender is an affordable option.