In case of an urgent requirement of cash, people often rely on personal loans. The rate of interest on them is higher than that on home, auto or other types of loans. Lenders usually consider many factors before sanctioning the loan to the customers who have applied for it. These include the loan amount, credit score, repayment capacity, income, the company you are working for, etc.
Owing to easy approvals and minimum paperwork, people opt for this loan. While applying for the loan one can try and get this loan at a lower rate of interest. Here are a few ways to get a personal loan on a lower rate of interest-
1. Before applying for the loan, check your credit score, which can be improved by paying off the debts and dues. A credit score of 750 or above increases the chances of getting a personal loan on a lower rate of interest. You can maintain this score by keeping your credit utilisation ratio within the 30 per cent limit, reviewing credit reports regularly, maintaining a mix of both secured and unsecured loans. In case of a joint loan, check your co-signed account to ensure a timely repayment. This is because delays and missed payments harm the credit score of both co-signing and primary borrowers.
2. If you pay your credit card bill in full, make timely payment of EMIs of loans every month, you can clinch a good interest rate deal on the personal loan. If your repayment history is good, you can negotiate better on the interest rates with your lender. Also, maintaining a good repayment history will help you get a better deal on another loan in the future as well.
3. Before finalising a loan, it is advisable to compare the interest rates online and by visiting the banks. In case you have taken any loan, then ask your lender as the existing lender often offer personal loans at a relatively lower rate of interest and provide better service terms. Apart from this, banks usually launch attractive offers on personal loans, you might be just lucky if you avail the loan during that time.
4. There are chances that even if your lender has offered you the loan at a lower rate, you actually end up paying a higher interest amount at the end of the loan tenure. This because the method of calculation differs among lenders. A lender may offer you a loan either on a flat or reducing interest rate. In the case of the former, payment of interest is calculated on the full loan amount throughout its tenure. However, in the latter, the payment of interest is calculated on the outstanding principal. Here, the EMI amount gradually reduces the principal amount.
5. Another important thing which should be considered is that your employment history and residential stability. Before sanctioning the loan, the bank requires the employment history of two years. Lenders also look at loan seekers if they are employed with state, central, PSU or other organisation. Your financial stability also plays an important role in deciding the loan interest rates.