A report indicates that in Q3 2019, personal loans experienced a growth of 28%. One of the prime reasons for this rapid growth is the availability of such unsecured credits to eligible applicants at comparatively lower interest rates.
However, a low-interest personal loan is available to only a select few consumers, based on eligibility and other factors. A borrower intent on availing these limited rates can follow the methods mentioned below.
Steps to acquire personal loans at lower rates
Those thinking of getting a personal loan at the best rates must be mindful of a few factors –
- Improve credit score
A borrower must hold a minimum credit score of 750 to apply for such loans. A higher score will help customers to easily secure a low-interest personal loan.
- Awareness regarding CIBIL score has improved greatly amongst millennial consumers, with 58% of them checking their ratings regularly.
- In comparison, this growth was limited to just 14% amongst non-millennial consumers.
While an applicant can get a personal loan with a poor credit score, interest rates tend to be higher in such cases. Thus, it is better to maximize this rating before applying.
Repaying existing dues at the right time and paying the total amount on credit cards are two ideal ways to improve the CIBIL score.
- Highlighting increased income
Borrowers with limited monthly income are often categorized as high-risk consumers since these individuals often fail to repay loans within their stipulated tenor. Thus, to balance this risk, financial lenders are prone to charge increased interest on credits for such high-risk borrowers. Similarly, an individual with a higher-than-average income is more likely to receive lower personal loan interest rates.
In this regard as well, a borrower must surpass the minimum income requirement set forth by his/her lender.
- Keeping debt to income ratio under control
Credit consumption has increased rapidly across India in the last few years. This means that most personal loan applicants today may already have existing debts in the market. Hence, these individuals are already burdened by EMIs for loans or credit cards of some sort. Repaying an additional personal loan under such a circumstance can be too difficult for some.
- A 2019 survey indicated that more than 45% of Indians were open to opting for loans to improve lifestyle and fulfill family needs.
- 28% of the respondents in this survey were eager to avail a personal loan in the future.
To ensure the rate of interest on a personal loan is nominal, an applicant must keep his/her debt to income ratio as low as possible. Repaying all outstanding dues before personal loan application may be the best way to ensure the lowest rate on such credit. Doing so also simplifies the repayment procedure for the borrower, limiting financial strain significantly.
- Negotiating with the lender
The interest rate that financial institutions quote is not the final one. Borrowers can always negotiate to acquire lower rates, especially if they have a long-standing relationship with the lender in question.
Nevertheless, this depends on an applicant’s standing with the lending organization and his/her skill at negotiations. At any rate, indulging in these negotiations is important, and loan applicants are well within their right to ask for lower personal loan interest rates.
- Repaying personal loans quickly
Finding the right personal loan tenor that works for a borrower is crucial. Nevertheless, one should try to repay outstanding sums as soon as possible to ensure lower interest rates. An individual who opts for a shorter repayment term will automatically bear lower interest payments on the credit than for a longer tenor.
Reputed institutions, such as Bajaj Finserv, offer extensive flexibility when it comes to personal loan tenor. Borrowers can choose up to 60 months to repay their dues.
The lender also provides pre-approved offers to simplify and quicken the lending process. These offers are available on personal loans, business loans, and several other financial products. Interested individuals can check their pre-approved offers by providing their phone number and name.
The personal loan verification process is quite simplified, thanks to the rise of fintech companies. However, failure to meet basic requirements is one of the prime reasons for personal loan rejection. If you surpass all of these checks by a lender, you are more likely to avail such credits at reduced rates.