Cost matters, more so when it’s about servicing a personal loan that comes at higher interest rates compared to a secured loan. Current personal loan interest rates range from 10.25-25% per annum on average.
The interest rates determine the extent of interest you will pay to the bank or a non-banking finance company (NBFC) over time. The higher the rates, the more you will pay and vice versa. No wonder why people search for the lowest personal loan interest rates. While some succeed in grabbing such deals, others fail.
Let us discuss the ways to grab lower rates. Following the same will help you curb your overall payment on a personal loan.
Here’s How You Can Grab the Best Personal Loan Interest Rates
Lenders consider various factors before pricing a personal loan. As it’s an unsecured loan, they carry out a strict underwriting process not only in terms of approval but also interest rates. Here are the factors lenders weigh before applying personal loan interest rates.
Credit Score – The Crucial Factor That Decides Personal Loan Interest Rates
A credit score ranging from 300 to 900 in India gives lenders the first impression of the borrower you are. The score is based on your repayment track concerning loans or credit cards you may have availed of.
Individuals with credit scores of 750 and above usually get lower personal loan interest rates compared to individuals with scores of around 650-700. A good score boosts the scope for pre-approved personal loans at lower interest rates. Pre-approved loans are defined by the name itself. Lenders pre-approve these cases based on credit score and a solid repayment track.
To maintain a good credit score, do the following –
Pay Your Loan or Credit Card Dues on Time
If you already have a loan or credit card dues and are planning a personal loan at some point, continue to pay your existing debts on time. Evaluate your income and expenditure keeping in mind the money you are left with after your existing debt payments. This way, you can save enough to repay on time.
Maintain a Lower Credit Utilisation Ratio
Utilising too much credit depicts your credit-hungry behaviour and not your debt management skills. So, if you have a credit card with a credit limit of INR 1,50,000 and you are spending around 80,000 out of it, you are utilising more than 50%, indicating potential payment default risks.
Have a Healthy Mix of Credit
Having too many unsecured loans can cause a significant dip in your credit score should you default on any of them. It’s advisable to have a suitable mix of secured and unsecured debts to maintain a good credit score.
Longer Length of the Credit
By displaying strong debt management skills for a long period, your impression before credit bureaus remains high, translating into good credit scores.
Also, when it comes to closing the credit card, people usually choose the oldest one, undoing the hard work put in by them to manage the credit card debt for a long time.
If you want to close the credit card, choose the newest one. If you want upgraded features on the old credit card, you can always ask the bank to do so. This way, you can grab the best personal loan interest rates.
High Income Boosts the Scope for Lower Personal Loan Interest Rates
People earning higher incomes always stand a chance to grab lower rates on a personal loan compared to those with lower incomes. High income empowers individuals with greater repayment potential, assuring lenders of timely loan payments. This assurance prompts lenders to lower personal loan rates.
The Impact of Professional Status on Personal Loan Interest Rates
It has a massive bearing on the personal loan interest rates you will eventually bag from the lender. Both salaried and self-employed need a stable source of income to convince banks or NBFCs to lower rates.
Working in a reputed firm helps salaried professionals in accessing lower rates. These firms are financially stable, boosting the scope for hassle-free salary disbursals and timely loan payments thereof.
Whereas self-employed must earn regularly to convince lenders for a lower rate.
Your Residence Matters Too!
The location where you reside is one of the primary factors banks and NBFCs consider to deciding personal loan interest rates. Lenders categorise locations based on the facilities, the extent of unlawful or criminal activities and other events. People living in places with good amenities and least to no unlawful or criminal activities will likely grab lower personal loan rates compared to someone living in substandard areas.
Summing Up
Grabbing lower rates is vital to lower your personal loan EMIs, resulting in lower interest repayments over the loan term, extending to as long as six years. Consider the factors mentioned above to grab lower rates and enjoy financial flexibility. Follow zarooribaathai.in for more insightful updates on finance, economy, beauty, health, women empowerment and sports.
