A personal loan is a type of unsecured loan that you can apply for. This means that lenders do not require borrowers to pledge any kind of collateral for such loans. A personal loan is also much more flexible as compared to other loans. For instance, an education loan can only be used for academic expenses. However, a personal loan gives you the freedom of using the loan amount for any personal expense.
Now, before applying for a personal loan, it is important to focus on getting a good deal. This is to ensure that there are no problems in repaying the loan. To keep the loan’s monthly instalments affordable, it is essential to make sure that your lender is offering a competitive interest rate for the personal loan.
There are a few ways that can help bring down the interest rate of your personal loan. Go through the following tips that can help in getting a lower personal loan rate:
- Try to pay higher monthly instalments
By making higher monthly instalments, the loan can be repaid faster, thus cutting down the repayment tenure. Since the loan’s interest is added with each instalment, paying off the loan as early as possible can help in reducing the interest you pay for the loan. Of course, make sure to use a personal loan EMI calculator to check whether the loan’s EMIs are suitable for your budget.
- Improve your credit score
Every financial institution checks the credit score of its applicants before approving any kind of loan. The credit score of an applicant helps the lender understand their previous payment record. It is advisable to maintain a credit score of 750 or more. Lenders are known to offer good deals to those with good credit scores, such as lower personal loan interest rates.
- Go for a floating interest rate
While taking a personal loan, you can choose either a fixed interest rate or a floating one. Now, a fixed interest rate would remain the same throughout the repayment tenure. A floating interest rate could keep changing as per market conditions. Floating interest rates are usually slightly lower than fixed interest rates, and this could make a significant difference to the loan’s monthly instalments.
- Maintain a steady employment record
Working for a public or private sector organisation and drawing a high monthly income can help improve your stability as a borrower for a lender. Also, avoid making too many changes between jobs. Showing continuity with one company indicates a steady employment record, which is a positive sign for any lender. This can help you in getting a lower personal loan interest rate.
Therefore, these are a few tips you should keep in mind as they can help in lowering the interest rate of your personal loan. In addition, it is also important to assess the charges involved before you apply for personal loan. This includes calculating charges such as processing fees and prepayment fees. This will help in understanding the overall cost of taking a loan.