The small-ticket personal loan market has grown by a whopping five times within the last two fiscals, according to a recent report. While the borrowed amount has majorly remained under the Rs.50000-mark, affordable interest rates have led to a surge in personal loan popularity.
- In its May 2020 Monetary Committee Meet, the RBI decided to slash the repo rate by 40 basis points to 4%.
- Since January of the same year, the central bank had to adjust and reduce rates by a total of 115 bps or 1.15%.
Such revisions also led to the widespread availability of a low-interest personal loan, enabling more borrowers to afford the resulting EMIs from such debts. However, besides the macroeconomic factors at play, individuals looking to opt for a personal loan can also undertake a few healthy practices to reduce interest liability further.
Lower your personal loan interest rates: Know-how
Listed below are some easy ways in which any potential borrower can ensure competitive rates on their personal loan –
- Meet all eligibility criteria
The first step when trying to opt for this credit option is to check personal loan eligibility parameters. While this can differ from one lending institution to the next, mentioned below are some basic requirements common across most lenders.
- A credit score of 750 or more
- Age of the applicant between 23 and 55 years
- Salaried or self-employed individuals with stable income
- Meet minimum income criteria
When it comes to such parameters, a prospective borrower can impress lenders by surpassing the minimum CIBIL requirements. Similarly, those with substantial income are able to negotiate with lenders to acquire a low interest personal loan. In both these cases, the risk to lenders is considerably reduced.
- Improve your credit score
A borrower’s credit score is often the first thing that personal loan providers check. Thus, individuals with a poor credit history should try to improve their creditworthiness before proceeding with a loan application. One can adopt several practices to build his/her credit profile over time. Firstly, keeping your credit utilisation ratio in check is crucial. Restricting credit usage to just around 40% of the available sum can help significantly.
Moreover, another easy way to ensure credit score improvement is by repaying one’s existing dues on time. Failure to stick to the repayment schedule can adversely affect one’s credit profile. Also, possessing an ideal CIBIL score can help individuals get better terms on their personal loans.
- Negotiating with previous lenders
Another simple way to acquire low-interest personal loan is to simply negotiate with one’s chosen financial institution. The negotiation process works smoother if the borrower in question is an existing customer of the lender. Such financiers may lower rates based on an individual’s spotless repayment record for past loans or credits.
Thus, one of the things to avoid while taking a personal loan is to approach any lender with whom the borrower has no past history or relationship whatsoever.
- Compare the rates before picking a lender
In some cases, the difference in personal loan interest rates between one lender and another can be quite significant. Thus, a thorough comparison of applicable rates and other charges related to a personal loan can help one make an informed decision. While comparing, individuals can also calculate personal loan EMIs for greater transparency and improved financial planning.
Some lenders, such as Bajaj Finserv, also provide pre-approved offers to existing customers, thereby reducing documentation and loan processing time. These offers are available on a range of financial products, including personal loans, business loans, etc. You can check your pre-approved offer by submitting a few details, like name and phone number.
While a pre-approved personal loan primarily reduces the formalities involved, thus making the process hassle-free, one must meet all eligibility parameters to avail of such credit. Thus, prospective borrowers must be aware and check personal loan eligibility to be on the safer side and reduce the chances of rejection of their loan applications.