Personal loans are unsecured loans that are quick to apply for and easy to avail. These loans can be used for anything, like a wedding, home renovation, travel, higher education, medical emergencies, or even to consolidate your existing debt. Unlike secured loans, personal loans rates are higher. But the best part about this is that personal loan rates are not absolute. They fluctuate from lender to lender and from borrower to borrower. If you are planning to apply for a personal loan, here are a few factors that you can take care of from your end to get a good deal on your loan.
The higher your income is, the more trust the lender will have in your capability to repay the loan. This will help you get a lower interest rate as there are fewer chances of you defaulting on a loan. Let’s say you earn INR 25,000 a month and want to get a personal loan. You might be offered an interest rate of 14%. Now, if you get a promotion and a salary hike and start earning INR 70,000, the same lender might offer you an 11% interest rate on your personal loan.
Your Credit Score
A credit score acts as proof of how well you have handled your debt in the past. With every payment you made against your credit card or a loan, points were added to your credit score. However, if you missed or delayed payment, your credit score would have come down. This score is one of the most important factors that lenders consider when they process your loan application. With a good score of 750 and above can get you great personal loan rates.
Good repayment history of your previous debt works well in your favour. This can get you an instant loan approval and even good interest rates. This discipline shows the lender that you are trustworthy and won’t hesitate to lower interest rates.
Any past payment default can get you higher interest rates or even get your loan application rejected. Most lenders prefer applicants who have not had any payment defaults in the past 12 months.
The reputation of your organization you work with also plays an important role in determining interest rates for your personal loan. Working with a reputed employer can get you a great deal. The more renowned and stable your employer, the lower interest rate you can get. The nature of your job also can have an impact on interest rates.
Loan Tenure and Amount
The loan tenure you opt for also has an impact on your interest rate. Personal loan tenures can range from 1 to 5 years. Longer-term loans can get you a shorter interest rate but in total, the amount you pay is more. A short term will fetch you a higher rate of interest but can help you save some amount. A higher loan amount can also fetch you a lower interest rate.
Your Negotiation Skills
If you have an existing relationship with the lender, you can negotiate a better rate of interest for your instant personal loan. Your loyalty can play a big role in this. You can negotiate the terms of the loan based on your relationship with the bank, or its staff.
Now that you know the big influences on your interest rates, you can now shop around for the best deal for you. It is a good practice to compare various lenders and choose the one offering the best deal. This makes your EMIs affordable and keeps pressure off you or your family.
To stay away from hefty formality fees, you can choose to apply for an instant personal loan online.