Ways to get a lower interest rate on a personal loan

Getting a personal loan is very easy these days. In fact, if you follow these suggestions, you can even get a better interest rate.

Contrast to secured loans like a home loan or car loan, for which you need to pledge guarantee; personal loans are unsecured loans that have higher rates of interest. Hence, one of the crucial things to do before taking out a personal loan is to go for a lender that offers you the lowest interest rate.

Before authorising your loan, the lender will contemplate a number of things to consider your creditworthiness. Here are some suggestions to keep in mind if you are keen to get a personal loan at a lower interest rate:

Have a repayment history

Credit Cards are really useful when there are unexpected expenses to manage. However, due to their high-interest rates, you should really be careful about clearing off your credit card bills in full and on time every month. It makes you look like a trustworthy borrower to your potential lenders, not to mention how it improves your credit score stay in top shape as well.

Compare and look around

If you are contemplating to avail a personal loan, an excellent place to start would be to verify your loan prerequisite and personal loan eligibility. Instead of spending a lot of time on every bank website searching for the best personal loan offer, contemplate visiting an online financial market to research and decide among various lenders. Another sensible thing to do would be to try out with your own bank and verify your eligibility for personal loan. Often banks that you have a relationship with will give you cheaper interest rates and better service.

Steady income and employment record

Individuals working with reputed or multinational companies are prone to get a more suitable deal. This is because of their employer’s competence to offer a steady income is higher. Normally, lenders will identify such individuals to have a steady income and more competent of repaying their payments on time.

Many lenders also have a preference that you have an employment record of at least two years. This includes one year with your existing employer. Lenders also perceive those who are working with the state government, central government, PSUs as more appealing borrowers. Further, your residential stability is one of the factors that lenders look at when assessing your loan application.

Before accepting any personal loan offer, verify and compare the terms proposed by various lenders. Make sure that your decision is based not just on the interest rate but also other aspects like loan tenure, prepayment charges, processing fee, loan amount etc.

Your credit score looks good

This is one of the first things that a lender will verify to assess the stability of your finances. A good credit score will place you in the safe zone and will influence your chances of loan approval. Here are a few ways you can keep your credit score in good shape:

• If you have a penchant for using your credit card regularly, ensure to keep a limit on your credit utilisation ratio. The ratio of how much credit you have presently taken divided by your total credit limit under 30%.
• Examining your credit report at regular intervals will help you know of any inaccuracies, sudden changes etc. that could be a part of your credit report. Credit score queries with a credit bureau are often free. So, do not stress about those enquiries influencing your credit score.

Making multiple credit card applications makes you look credit-starved to lenders. In fact, each loan application ends in an enquiry and affects your credit score. So wait sometime before you make another loan application if you have faced loan denial recently.