How to Get a Personal Loan at a low interest rate?

What is the personal loan interest rate?

Interest rates are a critical aspect of personal loans, as they determine the overall cost of borrowing. These interest rates offered can be fixed or variable and is influenced by various factors, including your credit score, income, and the lender's policies. A lower interest rate means lower monthly payments and less interest paid over the loan's lifetime, making the loan more affordable. Conversely, higher interest rates increase the cost of borrowing, leading to higher monthly payments and a larger total repayment amount. Understanding what personal loan interest rate means is crucial when comparing different loans to find the most cost-effective option.

Ways to get personal loan at low interest rates?

Low-interest personal loans are the best way to tackle your urgent financial needs. From financing your child’s wedding to booking a holiday with your partner, you can bankroll all your needs with a personal loan. But, getting a loan at the most competitive rate is essential. This will help you make repayments with ease. So, finding the best rate is an absolute must.

Here are a few ways to get a personal loan at a competitive interest rate:

1. Maintain a good credit score

Your credit score shows your creditworthiness based on how you have managed credit in the past. A score of 685 or higher makes you a good candidate for a personal loan. As a rule, the higher your score, the better it is for you. Lenders decide repayment terms, loan amount and interest rate based on your credit score. A higher score gives you an upper hand when it comes to negotiating terms.

2. Compare lenders to get the best offer

A little research will go a long way in your search for easy personal loans. Compare personal loan lenders in the market to find the loan with the best interest rate and features. This will take some time but will ensure that you make the right choice. An NBFC personal loan is a great option to get the funds you need immediately. Check your eligibility and apply for a personal loan online from Bajaj Finance. You can get instant approval and disbursal of the personal loan amount to your account within a few hours*..

3. Look for seasonal offers

Lenders notify customers about special offers through SMS and email. Keep a watch for these offers to make your loan more affordable. These offers allow you to get limited-period discounts on the interest rate. More often than not, these discounts are available when you apply online during festive periods.

4. Qualify based on your professional credentials

If you draw a high salary and work for a reputed public or private sector company, it makes you a stable candidate in the lender’s eye. So, use this to your advantage to negotiate a lower interest rate. Your company’s good reputation can help you get a lower interest rate since the lender gets assured that you will have the financial means to make timely payments.

With these tips in mind, finding the best rate on a personal loan is not difficult. Make the most of your high credit score and employment status to get a low interest rate personal loan.

Tips to improve your credit score to secure the lowest interest rate

Improving your credit score is essential for securing the lowest interest rate on a personal loan. Getting a higher credit score is the best way to get personal loan with low interest rates. Here are some effective tips:

1. Timely payments: Consistently paying your bills and credit card dues on time is the best way to get a personal loan with favourable terms. Late payments negatively impact your credit score.
2. Maintain low credit utilisation: Keep your credit card balances low relative to your credit limit. A credit utilisation rate below 30% demonstrates responsible credit use, which is attractive to lenders.
3. Regular credit report checks: Review your credit reports regularly to spot and dispute any errors. Accurate credit reports are crucial for maintaining a high credit score.
4. Limit new credit applications: Each credit application can cause a small dip in your credit score. Apply for new credit sparingly to avoid this.
5. Diversify your credit mix: A healthy mix of credit types, such as credit cards, retail accounts, and instalment loans, can positively affect your credit score.
6. Long credit history: A longer credit history generally boosts your credit score. Avoid closing old accounts even if you don’t use them frequently.

By following these tips, you can improve your credit score and secure a personal loan with a low interest rate, making borrowing more affordable.

Which is the best personal loan at a low-interest rate?

Personal loan interest rates can vary based on several criteria, including the borrower's age, credit history, monthly income, the lender's risk, and the borrower's overall financial situation, among others. The higher your credit score, the greater the possibility that you will qualify for a reduced interest rate. Bajaj Finance offers personal loans with interest rates beginning at 10% p.a. You can also check your pre-approved Insta Personal Loan offer to get a loan at a competitive interest rate.

Read more: 5 mistakes to avoid while applying for a personal loan

Factors affecting personal loan interest rates

When seeking a low interest rate of personal loan, understanding the factors that influence these rates is essential. Here are some key elements that determine personal loan interest rates:

Credit score

Your credit score is one of the most significant factors. A high credit score indicates a history of responsible credit use and low risk to lenders, often resulting in lower interest rates. Conversely, a low credit score can lead to higher rates due to perceived risk.

Income and employment stability

Lenders assess your income and job stability to gauge your repayment capacity. Higher, stable income often leads to better interest rates as it reassures lenders of your ability to make timely payments.

Loan amount and term

The amount you wish to borrow and the loan term also affect the interest rate. Typically, shorter loan terms come with lower interest rates, while longer terms might have higher rates to compensate for the extended risk to the lender.

Debt-to-income ratio

Your debt-to-income ratio (DTI) reflects the portion of your income that goes towards debt repayments. A lower DTI ratio suggests better financial health, leading to more favourable interest rates.

Market conditions

Economic factors and market conditions, such as inflation and central bank policies, can influence interest rates. During economic stability, rates may be lower, while economic uncertainty can drive rates up.

Conclusion

By following these tips, you can improve your credit score and secure a personal loan with a low interest rate, making borrowing more affordable