Availing a personal loan these days is easy, particularly with so many banks and apps offering quick approvals. But the actual challenge is to get the loan at a low rate of interest. The interest rate on a personal loan decides how much extra money you will repay, so even a small difference can save you a lot eventually.
If you are applying for a personal loan, you must know the tricks that can help you get a better deal. Lenders often determine your personal loan interest rate depending on certain parameters. These parameters include your monthly income, repayment record, credit score and relationship with the bank. Discussed here are how you can improve your chances of securing a lower interest rate.
Maintain a high credit score
When you place a personal loan application, one of the initial things a lender checks is your score. Having a score of over 750 is considered excellent. This score reflects your repayment behaviour i.e., whether you have paid loan EMIs or credit card dues in full and on time.
An excellent score indicates you are financially disciplined and have very less chances of defaulting on loan EMIs. This allows banks to trust you and they tend to reward you with a lower rate of interest and processing charges.
Make sure you maintain an excellent score. You can do this by repaying all your outstanding dues in full and on time, avoiding the usage of full credit card limit and not applying for multiple loans at once. Also, reviewing your credit report on a regular basis is crucial for figuring out errors.
Compare loan offers from multiple lenders
Do not jump on the first loan offer you see. Each lender has different criteria and may offer you a different rate.
Ensure to use loan comparison sites. Doing so will allow you to check who is offering the lowest interest rate on personal loans. Note that even a minor difference of 0.5% in interest rate can save you thousands over the repayment tenure.
Select a shorter loan tenure
When you select a shorter tenure, you pay higher EMIs, but lenders might offer a lower interest rate. You may wonder why. This is because shorter tenure means less risk for them. So, if you can afford to pay a higher EMI per month without impacting your budget, go for a two-to-three-year loan in place of a six-year loan.
This will not just get you a better rate but even save you a lot on interest overall. But remember – do not overburden yourself. Zero in on a repayment tenure where you can pay comfortably without skipping EMIs or needing to borrow again.
Have a stable income and job history
Banks prefer borrowers who have a stable income and steady job. If you are a salaried person working in a government job, or a reputed private company for more than two years, lenders see you as reliable.
So, when you are applying for a personal loan, mention your employer, years of experience, and monthly income clearly. Attach salary slips or bank statements to prove your financial stability. It helps lenders trust you and offer a lower interest rate.
Leverage your relationship with your bank
If you have been banking with the same bank for years, especially if your salary is credited there or you have a savings account with regular balance, you might already be eligible for a pre-approved loan. These pre-approved personal loans are often offered at lower interest rates, as banks already know your financial behaviour.
You do not even need much paperwork. Before looking elsewhere, always check offers from your your own bank—it may turn out to be the best and fastest option. Maintaining a good history with your bank helps you negotiate better terms and interest rates too.
Ending note
Securing a low interest rate on a personal loan is not about luck—it is about planning smartly. Start with a good credit score, compare offers wisely, choose a suitable tenure, and highlight your income stability. Also, build a good relationship with your bank and avoid multiple loan applications at once.
By following these simple steps, your chances of getting a better rate when applying for a personal loan will definitely improve. After all, a lower interest rate means smaller EMIs, and more money saved for your future goals.
