Tips To Avail Affordable Personal Loan Interest Rates

Personal loans with low interest rates are among the best financing options to address your immediate funding needs. Personal loans can be used to fund everything, from the wedding of your child to your partner’s vacation. It is important to get a loan at a competitive rate to make it easier to pay your loan back. Availing affordable personal loan interest rates is not very difficult though if you keep in mind a few essential aspects.

How to Get the Best Interest Rate for a Personal Loan?

These tips will help you obtain a personal loan at a lower interest.

Increase Your Credit Score: A high credit score is a sign that you are financially sound. Individuals holding high credit scores are eligible for lower personal loan rates from banks and financial institutions. Before applying for a personal loan, it is important to check your credit score. You should improve your credit score if it is lower than 750. If your credit score exceeds 750, you have a greater chance of getting a personal loan with a lower interest rate.

Do not miss any payments: Your credit score could be negatively affected if you default on loan repayment or credit card payment. Personal loan interest rates are usually determined by the lender. They will often consider your past repayment history. Those who pay their past EMIs on time and credit cards bills on time are more likely to pay a lower interest.

Watch out for various offers: Banks and financial institutions often offer special interest rates during holidays. You may get a lower interest rate if you apply for a loan during this offer.

Compare interest rates: Before you apply to any bank for a personal loan, compare the personal loan interest rate charged by different NBFCs as well as banks. This will allow you to get a personal loan at an affordable interest rate.

Use your work profile and company as an advantage: A high-paying job in a well-respected public or private company will make you a reliable candidate for the lender. Use this advantage to get a lower interest rate. A good company reputation can help you negotiate a lower interest rate, as the lender will be confident that you have the financial resources to pay on time.

You can negotiate with the lender: If you are a customer of a bank and have a good relationship, you may be able to negotiate for a lower interest rate.

Which One to opt Between Fixed Interest Rates and Floating Rates? 

You will pay the same interest rate throughout your loan repayment period if you take out a personal loan at a fixed rate.

However, the floating interest rate or variable rate is linked with the Marginal Cost of Lending Rate or the MCLR. Thus, the interest rate can fluctuate depending on when the MCLR moves.

A fixed interest rate gives you the benefit of knowing exactly what you will be paying over the loan term. A fixed interest rate is a good option for people who plan ahead.

However, if you are not averse to fluctuating interest, you can opt instead for a floating interest rate. A variable interest rate has the benefit that your repayment amount decreases when the interest is low.

What Is the Meaning of Reducing Interest Rates on Personal Loans?

The interest charged on a personal loan at a flat rate is calculated on the loan amount during the loan repayment period. If you take out a loan at either a reduced interest rate or a lower balance rate structure, interest is only calculated on the remaining loan amount. If you make monthly payments, the interest rate for the remainder will be calculated on your outstanding loan balance.

Although personal loans can be a great option for many financial needs, you might wonder how to get the most from your personal loan.

Many loan providers charge fees when disbursing personal loans. These could include administrative fees, processing fees, or foreclosure fees. Avoid unpleasant surprises like high foreclosure penalties and other fees. If certain unwanted add-ons are avoided, then you can avail of personal loan interest rates at a very affordable rate. Carefully read the terms and conditions section of the offer document. If you are satisfied with the fee structure, only proceed to the lender.