How do you Find the Best Personal Loan Interest Rates?

With digital advancements, availing a personal loan online has become more accessible. However, to keep your future finances secure, it is crucial to ensure that you get an affordable loan. Among the many factors, interest rates are one of the significant factors influencing the costs.

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As such, a low interest rate often results in a lower cost of borrowing. Understanding what affects these rates is one of the ways to secure a low personal loan interest rate. A better understanding of these factors will enable you to take the necessary actions to avail affordable credit.

Read on to know the steps you need to take to find the low personal loan interest rate for your needs.

Factors Affecting Personal Loan Rates

Before diving into how to get a low personal loan interest rate, it is essential to understand the factors that lenders consider. Generally, these factors revolve around your creditworthiness, loan terms, and other factors.

Here are some factors that affect the rates you get when applying for a personal loan online or offline.

Credit Score:

Your credit score is an essential determinant of your creditworthiness. As such, it plays a crucial role in the interest rates you get. A score closer to 900 or above 750 makes you a low-risk borrower. This increases your chances of availing a lowest personal loan interest rate.

Income History:

Lenders gauge your monthly income to understand your repayment capacity. A stable and high income indicates good repayment ability. This makes you eligible for an affordable interest rate. But low and irregular income may result in higher interest rates. This is simply because the risk of lending is higher.

Loan Amount and Term:

The loan terms, i.e., the loan amount and tenure, represent the lender’s risk and as such, affects your interest rates. Generally, a lower amount results in a more affordable interest rate.

However, a lengthy tenure will result in a lower interest rate but a high interest amount. This is because you pay interest for a longer tenure. Assess this with an EMI calculator and make an informed decision. Here, the goal should be to strike the perfect balance, thus ensuring you get the best rate.

Market Conditions:

Market conditions also influence the cost at which lenders get funding and thus also affect personal loan rates. These conditions include inflation, economic growth, government policy, repo rates, etc. In a downturn, loans will be costlier to avail and you should account for this before borrowing.

Tips on How To Get Lower Personal Loan Interest Rate 

Before applying for a personal loan online or offline, here are a few tips to get the best interest rates.

1. Research

When applying for a personal loan, compare your offers. This enables you to get a lower personal loan interest rate. Use an EMI calculator to estimate your borrowing costs and choose the one that offers the best deal. It isn’t enough to compare just the rates as a percentage. Know the actual payable amount and compare the difference accordingly.

2. Start With Your Bank

If you are an existing customer with a bank or NBFC, you are more likely to get a personal loan with lower rates. This is because the lender already knows your creditworthiness and your repayment ability. Best of all, they have your information on hand, and may even have personalised offers at the ready.

3. Apply with a Co-signer

Consider having a co-signer if you have a poor credit score or a limited credit history. A co-signer agrees to repay the loan if you cannot make payments. This assures the lender of repayment, and decreases the risk of lending. As such, it increases your chances of availing the low personal loan interest rate.

4. Read The Fine Print

Look for any hidden fees or charges, as well as any penalties for paying off the loan early or making late payments. All these account for your total cost of borrowing. As such, if you choose a lender with low rates but high costs, your total cost may be higher than the one who offers high rates but minimal extra costs.

5. Check and Improve Your Credit Score:

Your credit score significantly affects the interest rate the lender offers. This is why you should check your credit score before applying for a personal loan online. If your score is low, address any issues that may be lowering it.

6. Check your Credit Report:

Review your credit report regularly to ensure it has all the correct information. Errors or inconsistencies can have a negative impact on your credit score. These occur quite frequently as institutions often misreport data to credit agencies. Thankfully, such issues are easy to fix.

7. Make Payments on Time:

Ensure you’re making all your payments on time, including credit cards, loans, and other bills. This way, you have a good repayment track record, improving your creditworthiness. Such activity on your report increases your chances of availing a low personal loan interest rate.

8. Repay Existing Debt:

Lenders assess your monthly income and debt ratio. This is to understand how much new credit you can take on safely. So, pay off existing debt before applying for a personal loan online or offline. Doing this increases your repayment capacity, making you eligible for affordable credit.

9. Avoid Applying for Credit Frequently:

Lenders check your credit score while assessing your credit application. Each enquiry by the lender gets registered on your credit profile. And, having too many enquiries in a short span indicates you are credit hungry. This impacts your creditworthiness and, thus, the interest rates you get.

10. Negotiate with Lenders:

It is always a good idea to compare rates from different lenders. But once you’ve found a lender you’re interested in, don’t be afraid to negotiate. To negotiate effectively, understand your credit profile thoroughly to highlight your strengths.

After that, assess the additional costs levied by the lender. Once you’ve done that, talk to the lender to reach the most feasible point. When the lender agrees, make sure you get the terms in writing for future reference.

Securing low personal loan interest rates requires research, preparation, and negotiation skills. You improve your creditworthiness by understanding how personal loan interest rates work and being fiscally responsible before applying for a personal loan online. This increases your chances of getting a favourable and affordable rate.

Disclaimer : The above is a sponsored article and the views expressed are those of the sponsor/author and do not represent the stand and views of The Tribune editorial in any manner.