Due to the intense competition between lenders, many banks, NBFCs, credit unions, etc., have started offering low-interest loans. However, not everyone can avail of low-interest personal loan.
You must fulfill the lender’s minimum requirements to qualify for a personal loan. These requirements vary from lender to lender. The most common terms to qualify for a low-interest personal loan include the following:
- Good credit report or credit score of the borrowers
- An annual income within a certain range.
- A clean payment history
How to Get Low-Interest Personal Loans?
As stated earlier, according to the eligibility criteria, every lender has a different interest rate. Here is what you can do to qualify for the minimum requirements and increase your chances of getting a low-interest personal loan in India.
1. Increase Your Credit Score
People who have good credit scores not only get faster loan approval but also get a low interest rate on their loans. If you plan to apply for a personal loan and have a few months remaining, check your credit score and try to increase the same too. Keeping your credit score in the best shape can help you get a loan at attractive interest.
Also, when you check your credit report, ensure the same is error-free. If there are anomalies in the report, it can bring down your credit substantially. To check the same, contact duefactory.com and get a free copy of your report. If there are no mistakes on your report but your score is still low, Due Factory can help you improve your score, and you will be able to get credit at a low interest rate.
2. Check DTI (debt-to-income) Ratio.
Your debt-to-income ratio is also considered when you apply for a personal loan. The banks want to see whether you can afford to make loan repayments. If your DTI is high and you have many monthly debts, the lender is not too confident of lending you a loan. They might then increase your interest rate, considering you a risky borrower. So, the higher your DTI, the higher will be your loan interest rates.
3. Deep Research
Many lenders offer personal loans, some offering better deals than others. To avail of the best offer, it is imperative to research different options and compare them all. Before finalizing the first offer that looks good, keep at least two to three more options ready. This will help you select the best lender with the most competitive rates and submit a formal application.
4. Keep An Eye on Discounts/Offer
Sometimes the lenders offer seasonal discounts or make promotional deals. You should keep an eye on such offers. If you qualify for the lowest rate, getting an additional discount will make the overall proposition highly lucrative. Getting an additional discount of 0.25% or 0.50% can also generate a lot of savings.
5. Determine the Loan Amount Carefully
Though you may be approved for a loan of a higher amount, we suggest a loan for the amount you genuinely need. This will not only make your monthly EMIs easy to pay but can also lower the interest rate. Many lenders agree to lower the interest rate or waive a fee when the loan amount is not too much.
6. Negotiate
Consider negotiating with your lender for a lower interest rate on your loan. If you have a good credit score, it can serve as a starting point. Demonstrate your strengths, provide assurance, and request a low interest rate on the loan.
7. Go for a Lesser Loan Term
Personal loan offers flexible terms, usually from one year to five years. Some lenders can extend it to seven years, too. It is important to know that to get a low-interest loan; you should try to choose a lower loan term. The lenders offer better deals if you can pay the overall loan amount in the least time. If you can afford a high monthly payment, go for a shorter term. Use low interest personal loan calculator and help yourself!
Wrapping Up
Lenders consider various factors to offer a low-interest personal loan like credit score, salary, debt-to-income ratio, etc. A good credit score makes the lender believe you are responsible and can manage your loans and other credits. Also, consistent income and a low debt-to-income ratio can fetch you a personal loan at attractive interest.
Want help to keep your finances in the best shape? Consider availing duefactory.com services and improve your credit health!
Disclaimer: This article provides a general guide to the subject matter. You should seek specialist advice about your specific circumstances.
FAQs
1. How is the interest rate calculated on the personal loan?
Ans. Personal loan interest rates depend on many factors like credit health, credit score, age, salary, lender policies, etc.
2. What is the impact of credit score on the personal loan interest rate?
Ans. The higher your credit score, the lower the interest rate. This is because the lenders will find you more responsible and credit-worthy.
3. If I have an excellent credit score, what will be my personal loan interest rate?
Ans. The average personal loan interest rate for borrowers with great credit scores can be 10% to 12%. You will have to pay around 15% or more for an average credit score. It is even more so for people with low credit scores.
4. What are the important factors to consider when comparing low-interest personal loans?
Ans. Find interest rates of several lenders. Also jot down their processing fees, as it makes a huge difference to the final loan amount. Check whether the lender is charging any more fees, etc.