How to Get a Lower Interest Rate on Your Personal Loan

In the fast-moving, fast-paced world that we live in, the need for some extra money can prop up anytime, anywhere. It could also be for something that was planned well in advance, like a wedding, a holiday trip, or something that can come out of nowhere, like a medical emergency. No matter what the issue, sometimes delaying or skirting around the matter is simply not an option. 

Well, Personal Loans can help overcome these situations by providing the money that is needed in your hour of need. 

Personal Loans are unsecured loans that banks and other financial institutions provide to people who are in need of some extra money. Banks like ICICI bank provide Personal Loans for up to Rs 50 Lakh with a tenure starting from 12 months and going up to 72 months. 

The interest rates on these Personal Loans are usually affordable. You can also take various steps to ensure that the interest rate you are paying on your loans is not more than what you have to pay.

In this article, we will discuss steps which can help you get low interest for personal loan. 

1. Maintain a healthy credit score – A good credit score shows that in the past you have paid your debts and bills in a timely manner. That reassures a lender that you will be able to pay your EMIs on time and won’t default. A credit score of 700 is usually considered good by various lenders. So please try and maintain the same to get lower interest rates on your loan.

1. Compare lenders – Don’t just get fixated with one lender, compare terms offered by different lenders and choose the one offering you terms that you will be able to meet. 

1. Maintain a low debt-to-income (DTI) ratio – A DTI ratio relays how much of your income goes towards paying your payments. Lower the ratio; lower the risk of the borrower not being able to pay his EMIs. Therefore, if your DTI ratio is on the lower side, the higher the chances that you can avail of a loan at friendlier rates. So, if possible, do keep your DTI as low as possible. 

1. Look out for special offers – While researching for a Personal Loan, do keep an eye out for any special offers that banks or financial institutions have running at that time. Typically, there are special schemes available at festive times. You can take advantage of these schemes and get yourself the Personal Loan at lower interest rates and reduce the EMI amount you will have to pay.
2. Good relationship with the bank – Your relationship with the bank can also affect the terms that you are offered on a Personal Loan. If you have had a long-term relationship with the bank where you have been a loyal customer, then the chances of you getting a loan at lower interest rates increase. 

1. Stable employment/business history – A long and stable employment/business history also has a profound effect on the interest rates that are offered by banks to borrowers. Banks, as part of their eligibility criteria, require applicants to have a minimum of two years of employment history and be in their current business for five years if they are self-employed. A long and stable history will help you get better interest rates on your loans. Applicants who have a long employment history or who have been working with organisations of repute tend to get lower interest rates because the lenders see them as someone who is less likely to default.

The interest rates that you pay out on your loans impact your monthly budget. Therefore, it is advisable to get the best terms possible. At the outset, the banks would probably offer you rates that best work for them, but you can work your way around and get the lowest possible rates on your Personal Loans if you follow these simple steps. Even a small decrease in interest rate can make your life a whole lot easier.