You never know when life would throw up surprises, or you become passionate about realising a long-cherished dream. A personal loan is just the right thing you need to fulfil your desires and emergency requirements. Although it is a general perception that personal loan interest rates are higher than other types of loans, this article questions the existing belief and shows you the top-5 ways in which you can get the best interest rates on a personal loan.
Personal Loan Interest Rates are the Highest – Myth or Reality?
While it is not entirely wrong to say that personal loan interest rates are high, the benefits they bring to the table make them a popular option. Unlike mortgage loans, personal loans are unsecured loans. Hence, some lenders charge higher interest rates to offset the losses caused by defaulters.
However, you can stay ahead of the curve by keeping your personal loan documents in order and your financial profile in shape.
The Top-5 Ways to Get Best Personal Loan Interest Rates
- Improve Your Credit Score
Lenders like issuing personal loans to borrowers with a credit score of 750 or more. Analyse your credit utilisation ratio and try to keep it below 30%. To calculate the credit utilisation ratio, find out your existing credit, and divide that with your credit limit.
A good way of keeping your credit score high is to settle off your existing debt and apply for a personal loan with debt-free financial status. In case you are unable to do so, make sure you pay the EMI and principal of the existing loans on time. Doing so will assure the lender that you can pay the personal loan EMIs on time and automatically puts you on a higher pedestal to negotiate the interest rates.
- Capitalise Your Professional Credentials
As personal loans are security-free loans, lenders love people who have an income that is as solid as a rock. Read about the income proof and other documents required to see if you fit the bill.
If you are self-employed, having a robust balance sheet can work wonders by assuring the lender about your repayment capability.
Hence, you may use your professional credentials to get a personal loan at a low rate of interest.
- Keep an Eye for Special Discounts
Lenders often resort to flash sales and special offers to rake up revenue and acquire more customers. As a smart borrower, you must be patient and wait for such occasions to capture the best offers. In events like these, it is easy to find discounted personal loan interest rates against minimal documents.
- Check Out the Interest Rate
Interest is the percentage charged by the lender on the borrowed amount. Even a small difference in the personal loan interest rate or percentage can lead to changes in the monthly instalment that you are required to pay to the lender. You can use an online EMI calculator that shows the amortization table showing the amount of principal and interest you are expected to pay every month.
- Have a Stable Employment History
Staying with an organisation for more than two years in a row puts your profile in a positive light. Many reputed lenders offer special discounts for people working in the government sector. Lenders seek at least 3 years’ Income Tax returns and 6 months’ bank statement as proof of income.
Thus, the stability of your job or business can play a big role in deciding the personal loan interest rate.
Bonus Tip
While the above-mentioned points are good at building the foundation, choosing the right lender sums it up all. A lender that values your dreams generally offers several benefits like low personal loan interest rates, minimal documentation, fast loan disbursal, and flexible loan amount. Plus, you may also get loyalty benefits for being a valued customer.
Conclusion
When chosen wisely, a personal loan can offer better many other benefits apart from interest rates when compared to other types of loans. It is important that you are well-informed and empowered to make such significant financial decisions. It is thus imperative to stay abreast with the latest information on the terms of your loans.
