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How to qualify for the lowest interest rates on a personal loan?

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How to qualify for the lowest interest rates on a personal loan?

A personal loan is a fast and easy way for individuals to get a substantial sum of money to meet their immediate financial needs. You can use a personal loan for a range of expenses, including a funeral, wedding, vacation, medical emergencies and home renovation. 

The money borrowed from a financial institution is generally disbursed directly into the borrower’s bank account. This process usually takes no more than a couple of days, which means users can start spending immediately. Personal loans are also more beneficial than credit cards since they have a lower interest rate and help with finance management. 

According to recent data and reports on the current personal loan interest rates, customers pay an average annual percentage rate (APR) of 9.09% on personal loans in a year. On the other hand, credit cards levy an average interest rate of 16.44% per year. 

While there are ways to reduce these rates such as by enrolling for autopay services, urgent personal loan also help you not to use more than you are allowed. Credit cards often lead to people spending more than they can afford to pay back. This leads to long-term debt and poor credit scores. 

Getting a low interest rate on your personal loan helps you save tens of thousands on your overall amount. Whenever you are planning to take a personal loan, make sure you do everything you can to get the lowest possible interest rate on your borrowing. 

Typically, your credit score will decide how high your credit score is. The higher your credit score, the lower your interest rate is likely to be. 

That being said, not having a perfect credit score won’t get your loan approval rejected. In fact, some lenders provide loans with the sole objective of improving individuals’ credit scores. Just be prepared for a higher rate of interest, or make sure you improve your credit score before applying. 

Factors That Affect Personal Loan Interest Rates:

Every lender including NBFCs base interest rates on the costs incurred on their funds and the evaluation of the borrower’s credit risk. Some of the key factors affecting personal loan interest rates and how much you get charged are as follows:

1. Credit score:

This is one of the most critical factors. A credit score tells the lender about your credibility and the risk you carry for their funds. Borrowers with a higher credit score get to choose a lower interest rate since they come with lower risks. 

Make sure your credit score stands at 750 or higher. Several good financial habits can also help you improve your credit score, such as repaying loan EMIs and credit card bills on time and not borrowing multiple loans at the same time. 

2. Income:

If you are earning a high salary every month, you have a higher chance of repaying your loan EMI without too much of a hassle. This makes for a lower risk factor for the borrower.

3. Employer:

Who you work with or where is a key factor in a salaried individual’s personal loan application. They usually get lower rates of interest than self-employed individuals because of higher income certainty. Even among salaried individual applications, PSUs and government organisations are generally given lower rates of interest. 

This is because they have higher income certainty and job security than other salaried individuals. At the next level are MNC and reputed private company employees. Such organisations generally fare better against uncertain economic conditions and bear lesser risk.

4. Existing lending relationship with the NBFC or finance company:

Several financial organisations provide concessional personal loan interest rates to applicants with an existing account with them or those who have a past borrowing relationship with them. Thus, if you feel like you want a specific personal loan or other financial products from a specific NBFC, make sure you open an account first and strengthen your bond with the lender. 

Tips to Get the Lowest Rates of Interest in Today’s Market:

Implementing these steps will help you get the lowest personal loan interest rates:

  • Building and maintaining your CIBIL score at 750 or higher
  • Checking for pre-approved NBFC and financial company offers
  • Tracking the concessions on interest rates provided in festive periods by lenders
  • Enquiring about existing loan rates with your existing accounts and lenders
  • Visiting online marketplaces to compare offers on personal loans from lenders. 

To get an urgent personal loan at a lower rate of interest, get in touch with our team today.

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