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How to get the lowest rate on Personal loan

Getting lower interest rates is not as easy as you may think!

Let’s see how you can get the desired personal loan interest rate in Apr 2021 without pleading too much :

Work on your credit score
High credit score speaks for itself. It clearly indicates that you are Creditworthy. Applicants who generally have a high credit score are usually offered personal loans at the lowest interest rates. The logic is simple, Banks want their borrowers to be responsible and if they find one, they are not going to lose out on you. So, make sure you have a credit score of 750 or above and never forget to check free credit score online.
Do not miss paydays
One thing the lenders hate is a late payment. Make sure you do not miss out on repayments because falling behind may have an adverse impact on your credit score. Your repayment history is taken very seriously by the credit rating agencies. If you are responsible with repayments, you can negotiate your way to a lower interest rate.
Wait for the right occasion
Banks and lenders always come out with lucrative offers during special occasions and festive seasons. India is a country that celebrates a bunch of festivals every year, so if you can wait for the right time you may be in for a festive treat.

Compare Personal Loan Interest rate, Apr 2021

It is always better to look around first before applying for a loan than to regret later. So, make sure you compare various personal loan options at all major banks and NBFCs. It will not only help you find competitive interest rates, but it will give you an idea about which product is hot in the market.
Brush up your Negotiation skills
You can get a much better deal if you are already an existing customer of a bank or lending institution. You can simply submit a formal written request in order to negotiate the
personal loan interest rate
with the lender.

When Should I Choose Personal Loan ?

Often taking a loan can take a financial toll on you. It is especially important for you to understand your specific needs. You need to realize that you will have to pay back the borrowed amount with added interest. So, only after making sure that you need the funds urgently for a short period and you are financially capable of paying it back , should you apply for an instant personal loan.

Instant Personal loan
is much more flexible in nature and is usually disbursed at a faster rate than other type of loans. You can use it to cover medical emergencies, renovate your house, use it for a wedding or a vacation or even if you are falling short funds cover a specific purpose.

In many cases, you have to pledge your financial property in order to obtain a loan. In such cases, personal loans are the best option. You can easily borrow desired loan amount without pledging anything. All you need is a good credit report, income, and legitimate documents.

Approval rate hierarchy

Getting approved for a instant personal loan is not as easy as you may think, the biggest factor that comes into play is your credit score. Now there is a certain

hierarchy banks follow when it comes to your credit score. Higher the credit score higher the chances of getting approved. Let’s see how:

Credit ScoreChances of getting approvedCredit Rating
300 - 599You may not qualifyPoor
600 - 750Your loan may get approved but at a higher interest rateAverage
750 - 799Not only will you get approved but might also get it at lower interest rateGood
800 - 900You can get approval for a higher loan amount with lower interest rate and quick disbursalExcellent
Check   free credit score online

What is the role of Credit score in loan process ?

Since the banks and lending institutions do not ask you to pledge a collateral, the lender carries the risk of losing money in case you fall back on your payments. That is why lenders go through your Credit Report, so that they can evaluate your credit history and track your repayment behavior from the past. This gives them an idea of your financial habits so that they can identify any potential bad debts. Usually if you have a good history, banks are lenient with the disbursal of funds. Not only will you get approved quickly, you can also negotiate for a lower interest rate and a higher loan amount.

Lenders are mostly looking for borrowers who have a credit score of minimum 750. A score above this denotes that the borrower has been diligent with borrowed funds. So, borrowers from this category do not fall in the high-risk category. The important thing to do here is to check free credit score online regularly to stay ahead in the game.

Factors affecting

Personal loan interest rate in Apr 2021

Income: Lenders generally takes the applicant’s income into consideration while narrowing down the interest rate. Borrowers with higher income usually attract more lenders as they fall under the low risk category, while borrowers with low-income who fall under the high-risk category can turn out to be potential bad debts.
Employer Credentials
The banks and lending institution is more likely to offer you a lower rate of interest if you work for a reputed organization.
Type of Employment
Lenders also offer different interest rates to borrowers based on the type of employment which means the interest rate may differ based on self-employment or salaried employment.
Age
The age of the applicant also has an impact on the interest rate offered by the lender. Borrowers who are closing in on their retirement may be offered a higher interest rate.
Relationship with your lender
If you are an existing customer of a bank or a lending institution, you may be offered a lower rate of interest compared to a new customer. So, if you have a good relationship with your banker you may get away with a higher loan amount, lower interest rate and quick disbursal. However, this completely depends on the bank so they may choose not to give any such facilities depending upon the situation.
Check   free credit score online

Fixed Rate v/s Floating Rate

Interest Rate

If you go for a personal loan which has a fixed rate of interest, you will be charged a constant rate of interest throughout the loan repayment period. In case of floating or variable rate of interest is based on the Marginal Cost of Lending Rate or the MCLR, causing the interest rate to fluctuate as and when the MCLR changes.

Standing Benefit

The most important benefit of opting for a fixed interest rate is that you know exactly how much you will have to pay during the tenure of repayment. So, if you wish to plan your finances in advance, you can go for a fixed interest rate.

In case a fluctuating rate of interest does not bother you, you can opt for a floating/variable interest rate. The benefit of opting for a floating interest rate is that your repayment amount will reduce when the interest rate is low.

What is meant by Reducing
Interest Rate in case of a Personal Loan?

When you opt for a personal loan at a flat interest rate, the interest is calculated on the total loan amount throughout the repayment tenure. In contrast, if you opt for a loan at a reducing interest rate/reducing balance rate structure, the interest is only calculated on the outstanding loan amount. So, in this case, when you make a monthly repayment, the interest for the remaining of the repayment tenure will be calculated on the outstanding loan balance.

How will you calculate the EMI on your Personal Loan ?

The interest rate charged by the banks and lending institutions are based on multiple factors. You can easily check and compare various interest rates levied on different personal loan products online, to check click here

The interest rate charged by your lender will have a significant impact on the monthly EMIs. So, it is particularly important for you to calculate the EMIs beforehand. This will help you decide how much you need to save every month.

At CreditKaro, you can use the personal loan EMI calculator tool to know your monthly EMI.

In order to access the EMI calculator, you simply have to visit our website and go to the ‘EMI calculator’ tab. After you click on the tab, you will be directed to the EMI calculator page. Once you are there you can fill in the required details to get relevant information.

Apply instant personal loan online
  • Formula to calculate EMI

    EMI = [Px RX(1+R)^N]/[(1+R)^N-1], wherein P represents the loan amount,

    R is the interest rate charged per month, and N indicates the total number of monthly installments.

FAQ

Yes. Your income determines if you are a capable enough to pay back the borrowed amount. Higher the income, higher the chances of getting approved for a loan amount with lower interest rate.
Yes. If you have been associated with a reputed organization, you are more likely to get approved for a loan. Your work experience showcases stability, and this also has an impact on the lenders decision of approving you for a higher loan amount.
A good credit score means that you are responsible with your finances and you are responsible with repayments. This keeps you out of the high-risk category. If your credit score is 750 and above, there are chances of getting approved for a lower interest rate.

Besides your interest rate, there are a few more charges which are included in the total cost of the loan:

  • Processing charges – for processing your application
  • Verification charges – In order to verify your background and other parameters
  • Government taxes – GST
  • Late payment fees – In case you don’t pay your EMIs on time
  • Prepayment fees – In case you want to prepay a part of your loan
  • Foreclosure fees – In case you want to close your loan ahead of schedule

There are a few lenders may charge you a fixed fee for this facility.  The prepayment fee is usually calculated in two ways:

  • As a percentage of the amount you want to prepay, or
  • As a percentage of the principal amount outstanding at the time of prepayment.
While processing your loan application, banks will look into your credit history to find out how much debt are you currently in. If they notice that you’ve been spending most of your income to repay existing loans, they may not feel comfortable granting you a personal loan. Even if you get approved, you will be charged a high rate of interest.
If you have a good credit score, at least above 750 and you have been in good terms with the lending institution, you might get approved at preferential rates. Also, working with a reputed organization and having a good credit history is guaranteed to fetch you better offers.
Yes, there is a way you can get approved for an interest rate lower than what is advertised by the lender. This is where your negotiation skills play an important part. If you’re good at negotiating a competitive rate, you can certainly obtain it.
If you have an existing relationship with your bank or loan provider, nothing like it. If you share a good repo with your banker, your chances of getting approved for lower interest rate is higher than new customers.
The only way you can avoid paying pre-payment charges is if your lender waives it off.
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