This Is How You Can Avail Better Interest Rate for Your Personal Loan
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This Is How You Can Avail Better Interest Rate for Your Personal Loan

  • Highlights

  • Keep a high credit score

  • Maintain a healthy repayment track record

  • Compare offerings from multiple lenders

  • Understand the fine print of loan document

One of the major considerations as a borrower while availing personal loan is the rate of interest. Being an unsecured mode of finance, interest rates are a bit on the higher side. However, there are ways through which you can avail better and competitive interest rate for your personal loan.

Maintain a High Credit Score

A high credit score reflects your responsible behaviour when it comes to loan repayment. It gives your lender the confidence in your loan repayment abilities. Thus, you stand a better chance to negotiate with your lender on the interest rate. You can maintain a high score by:
- Paying your bills on time
- Effectively managing debt
- Avoiding impulsive purchase through credit cards
- Making multiple applications for loans within a short span, in case of a rejection

Keep a close eye on your credit report to identify any suspicious activities. Generally, lenders and financial institutions prefer a credit score above 750.

Additional Read: Things You Can Do To Improve Your Personal Credit Score

Keep a Healthy Repayment Track Record

A healthy repayment track record entails paying all debts on time. It enhances your credit score and builds trustworthiness among lenders. Bad loans affect the financial stability of lenders and hence they shy away from lending those with an unhealthy repayment track record. Even if lent, the interest rates are high.

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Your CIBIL score and your Personal Loan

Lower the interest rate, lesser the money you repay on the loan you borrow; this is the simple logic behind unsecured personal loans. But lenders do not assign the interest rate arbitrarily. They consider your credit score – a measure of your creditworthiness – to assign you the interest rate for your personal loan.

Your credit score ranges from 300 to 900. The higher your credit score, the better are your chances of getting approval and favourable terms on your Personal Loan. Lenders like Bajaj Finserv usually mandate a credit score of at least 750 before processing your personal loan application.

Lenders prefer an applicant with a high CIBIL score because it demonstrates their ability to handle credit well. A low score, on the other hand, indicates a previous instance of loan delay or default.

If your CIBIL score shows you to be a high credit risk, you will be charged a higher interest rate on your personal loan, and vice versa.

How you can use the Personal Loan?

Compare Various Lenders

Comparing offerings from multiple lenders is an essential financial exercise. While earlier, banks served as go-getters for personal loans, the emergence of non-banking finance companies (NBFCs) has changed the lending landscape. You can avail personal loans from NBFCs, whose lending norms are somewhat relaxed as compared to banks. However, before zeroing in, it’s essential to spend some time comparing offerings from different lenders to seal a profitable deal.

Read and Understand the Fine Print

One of the most vital aspects of personal borrowing is reading and understanding the fine print. Going through chunks of paragraphs of the legalese printed in small fonts would help you shield against unpleasant surprises, such as an upfront interest charge and insurance premium, that will reduce your disbursed amount.

Look Out for Special Offers

Lenders often come up with special offers on personal loans, particularly during the festive season. Though these offers are for a limited period, it gives you a great chance to avail funds for personal needs at a lower interest rate. You can sign up for updates on such offers and cash on the opportunity when presented.

Interest rate on personal loans has a say on monthly EMIs. Availing a loan at a competitive interest rate not only eases the EMIs but also ensures your expenses and other financial goals are on track.

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