How to get personal loans with low interest rate

Smart borrowing is about fulfilling your needs as affordably as possible. While you can apply for a personal loan for any goal, keeping an eye on the personal loan interest rate is crucial. This rate dictates how affordable your repayment experience is as it directly affects your EMIs or monthly instalments.

With a nominal personal loan interest rate, you can repay the loan amount stress-free over a time period of your choosing. With a high rate, in contrast, you may either choose a shorter repayment duration to keep your cost of borrowing low or pay more over a longer tenure. Both these options can stress your finances.

So, keep your future financial wellness in mind and pay close attention to the personal loan interest rate you are being charged. Choose a lender with the most competitive rate and apply for a personal loan only when it fits your budget.

Read on to know how you can get a low personal loan interest rate, no matter whether you plan to finance a wedding, education, home improvement, medical needs or a vacation.

8 Tips To Get The Lowest Personal Loan Interest Rate

Check Online, Compare, Repeat!

The first and foremost tip to getting the most affordable personal loan interest rate is to do your research. By checking the interest rates of various lenders online, you can do a quick comparison and find the best one. To make the process easier, compare rates published by aggregators.

Financial marketplaces online often publish personal loan interest rates of top lenders side by side. This helps make the process simpler and swifter. Once you identify the lowest personal loan interest rate, you can check the lender’s criteria to see if you qualify for the personal loan.

Watch For Pre-Approved Offers

Some lenders offer existing or prior customers pre-approved offers. These often come with the most nominal personal loan interest rates as they are based on your profile as a borrower. If you have repaid past loans responsibly and on time, you are likely to get an affordable offer.

Get Seasonal Personal Loan Deals

Another way to get the lowest personal loan interest rate is to await certain periodic offers rolled out by lenders. These are normally available during festive seasons and offer the most competitive rates in the market.

A drawback here is that you may have to delay financing until you find such offers. So, if your need for cash is not urgent, it is best to wait for such deals and make the most of low rates when you can get them.

Make Sure Your Credit Score Is Up To The Mark

Be it CIBIL, Experian or any other credit bureau, keeping tabs on your credit score and ensuring it is high is the sure-fire way to get a low personal loan interest rate. A credit score tells a lender how safe it is to lend you money.

This is because it showcases your credit behaviour in numeric terms. For instance, with a score above 750, lenders are assured that you have experience with credit, have repaid on time in the past. This is a good sign and makes lending easier.

If you haven’t already, start building your credit history and ensure you are timely with repayment. Don’t apply for multiple loans at once as this lowers your score. Also, refrain from leading a life that is built on credit.

When you use the full limit of your credit card every month, your credit score decreases. By using credit wisely and repaying diligently, you can improve your credit score. This helps you get affordable deals on personal loans.

Check Your Existing Debts

If you have any loans you still need to pay off, check them before you  apply for a personal loan. These may include home loans, two-wheeler or car loans or any others. Existing debt limits your repayment ability, and will factor into the lender’s assessment.

Usually, lenders approve personal loan applications only when your FOIR or Fixed Obligations to Income Ratio (Total debt divided by your monthly salary) is less than 30%. To get a nominal personal loan interest rate, match this ratio by repaying some or all of your debts.

Match Or Exceed The Lender’s Eligibility Criteria

Lenders set certain terms that every borrower has to meet in order to borrow from them. These are related to your income, employment history and current status, age and more. Most of these criteria assess your financial stability and ability to repay.

You can get a competitive personal loan interest rate when you meet all these parameters. In fact, if you surpass the lender’s income criteria based on where you live and don’t have too much existing debt, you are more likely to get an affordable rate.

Utilise Employer-Related Deals

Your employer may have tie-ups with certain lenders as part of their employee benefit program. Ask your HR department about this to see if you can apply with such a lender to get a lower personal loan interest rate. Such deals are given to reputed MNCs or other public or private companies to make financing easier for employees.

Leverage Your Existing Relationship With Lenders

Just like pre-approved offers, you can get better personal loan interest rates when you apply with a lender who is familiar with your profile. This may be the bank where you have a salary account or an NBFC you have taken a loan or other credit product from in the past.

This tactic works even if it was not a personal loan. However, ensure that you have a good record with them and have repaid past dues on time. Your relationship with the lender can help you get special deals.

Keep in mind that personal loan interest rates vary as they are based on a range of external financial policies as well as internal policies of a lender. They may also change based on whether the lender is a bank, NBFC or a 100% digital lending app.

The tips above can help you get the lowest personal loan interest rate no matter where you borrow from. Choose your lender carefully and ensure you also check other fees and charges before you apply for a personal loan. All these factors also add to the cost of a personal loan.

Moneycontrol Journalists were not involved in the creation of the article.