In the pursuit of fulfilling our dreams and aspirations, personal loans have emerged as reliable allies, providing the necessary financial boost. However, securing a nominal personal loan interest rate is the key to ensuring a stress-free borrowing experience. This vital factor determines the affordability of your monthly repayments, directly impacting your future financial wellness.
In this post, we unravel the secrets to obtaining a less-interest personal loan, whether for a wedding, education, home improvement, medical needs, or a rejuvenating vacation.
Tips for Getting a Personal Loan at a Low-Interest Rate
Obtaining a personal loan with the best personal loan rates in the market requires research.
Here are six effective ways you can follow to secure the best deal for you:
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Have a good credit score
Maintaining a credit score of 750 or above increases the likelihood of getting a personal loan. To achieve this, pay dues on time, keep credit utilisation below 30%, avoid multiple credit card applications, monitor credit reports, and maintain a mix of secured and unsecured loans. Ensure timely repayment for co-signed loans to protect your and the primary borrower’s credit scores. Missed or delayed payments can negatively impact both parties.
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Check your existing debts
Before applying for a personal loan, check your existing loans, such as home or car loans, as they impact your repayment capacity and the lender’s assessment. To increase your chances of approval and secure a lower interest rate, ensure your FOIR (Fixed Obligations to Income Ratio) is below 30%. Repay some debts to align with this ratio and improve your nominal personal loan interest rate eligibility.
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Compare lenders
When looking for a less-interest personal loan, comparing lenders is helpful. Research and analyse loan offers from banks, credit unions, and online lenders. Compare interest rates, loan terms, and other fees to find the most favourable deal. This way, you can identify the lender offering the lowest interest rate and secure a personal loan with lower overall costs, ultimately saving you money on your borrowing.
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Go for a shorter loan tenure
Opting for a shorter loan tenure when applying for a personal loan can lead to a less-interest personal loan. A shorter repayment period means you will repay the loan faster, reducing the overall interest paid. While monthly instalments may be higher, the total interest cost over the loan term decreases, saving you money. It’s a favourable choice if you can manage higher monthly payments and want to minimise the interest burden on your personal loan.
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Avoid multiple applications
Applying for loans with multiple lenders can negatively impact your creditworthiness. Avoid multiple loan applications to protect your credit score in the long run.
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Employer’s credibility
Working in an MNC or a reputed company increases the likelihood of obtaining favourable personal loan deals. Lenders perceive these employers as more reliable, offering stable jobs and a steady income.
This impression assures lenders that borrowers can meet their EMIs on time, making them more willing to provide better loan terms and lower interest rates.
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Providing collateral and co-signers
Providing collateral involves offering an asset, like property or a fixed deposit, to secure a loan. Collateral reduces the lender’s risk, leading to lower interest rates. A co-signer, on the other hand, is a person who guarantees loan repayment if the primary borrower defaults. Co-signers with solid credit profiles can help borrowers qualify for loans and secure better terms. Both collateral and co-signers play crucial roles in influencing loan approvals and interest rates.
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Negotiate
Negotiating involves discussing the interest rate and loan terms with the lender to secure a more favourable deal. If you have a strong credit profile and are a desirable borrower, express your willingness to borrow at a lower interest rate.
Lenders may be open to adjusting the rate to retain you as a customer or based on the overall risk assessment. Being confident and proactive in the negotiation process can lead to a reduced interest rate on your personal loan, saving you money over the loan tenure.
Conclusion
Obtaining a personal loan at a low-interest rate requires careful planning and consideration of various factors. Ensure you have a solid strategy before applying for a personal loan to improve your loan approval chances.
You can start by improving your credit score, checking your existing debts, and negotiating terms whenever possible to increase your chances of securing a personal loan with a favourable interest rate, ultimately saving you money in the long run.