Customers get a personal loan to cover a variety of general expenses such as big-ticket purchase, medical bills, home repair, child’s education, dream vacation, and daughter’s marriage. A personal loan is an unsecured loan i.e. you don’t need to submit an asset to get a personal loan. However, the rate of interest on a personal loan is lower than that on other secured debts, like credit cards. Currently, the average interest rate applicable on a personal loan ranges from 10% to 24% per annum. Interest rate depends on a borrower’s eligibility; someone who fulfils all the eligibility criteria can get the Best personal loan at low interest rate.
What does the best loan rate mean?
Apart from other aspects, the best loan refers to a personal loan with the lowest APR (Annual Percentage Rate). Lowest APR means you get a personal loan at most favourable terms.
Here is how you can get the best personal loan:
Improve your credit score
Your credit score is one of the most important factors that lenders consider to determine your eligibility for a personal loan. If you have a proven record of paying your credit card or loan EMI on time, you are most likely to have a good credit score. The higher your credit score lower will be the interest rate applicable on your personal loan.
In any case, if your credit score is poor, you can improve your credit score by taking the following steps.
● Clear all your credit card outstanding dues before the due dates
● Get a credit report from credit bureau and make sure errors, if any, in your credit report are disputed
● Never use more than 30% of credit utilization because this will establish your credibility for financial discipline and management
Compare the rates from multiple lenders
Each bank/ NBFC will have its set of criteria for approving a loan, so don’t instantly apply with the lender you see at first. Get rate offers from multiple lenders. Compare interest rates from all of them and choose the lender offering a personal loan at lowest interest.
Always remember that an interest rate doesn’t give you a clear picture about what your loan costs. You should also consider the type of interest rate and other associated charges to get a better sense about the cost of your loan throughout the tenure.
Compare personal loan APRs — not just base rate
APR stands for Annual Percentage Rate. It gives you a better idea about how much you will need to pay each year. But keep in mind that penalties like prepayment charges, late payment charges, cheque dishonour charges etc. are not included in APR.
Choose for shorter personal loan tenure
If you want to get a personal loan at a reduced cost, try to choose a short personal loan term. Select the shortest loan repayment tenure that allows you to borrow the required loan amount and won’t eat a big chunk of your monthly income in the form of EMI. If you think you can close the loan ahead of defined tenure, search for a personal loan with no or low prepayment charges.
Do not apply with multiple lenders simultaneously
When you search for a personal loan, don’t apply with multiple lenders at once. Multiple loan applications create a hard enquiry on your credit report, and too many hard enquiries can damage your credit score. For this reason, you may not be offered the best deal even if you have been maintaining a good credit score and managing your repayments in a disciplined manner for years. Instead, you should use online tools on various websites which take just the key information about you and tell where you can get the best deal from. Soft searches are out of a lender’s knowledge, and you can try this as much as you want.
Add a co-applicant
An applicant with a poor credit score may get approval for a personal loan but on higher interest rates. To avoid a higher Personal Loan interest rate, you should consider applying for a joint loan with someone who has a good CIBIL score. When you add a co-applicant to your personal loan application, lenders will consider your and co-applicant’s financial status to determine the interest rate. Making a woman the principal loan holder means lower interest rates.
Go for a secured loan
Although a personal loan is an unsecured loan that is not supported by any collateral, you can offer assets like land, gold, fixed deposits etc to get the loan. An asset acts as a guarantee against the personal loan, lowering the likelihood of risk because the lenders can retrieve its money if you default on a personal loan. Also, many lenders offer a personal loan at a lower interest rate when it is secured by collateral.
Getting a personal loan at most favourable terms is not rocket science, but it does take due diligence. You can get a personal loan from several banks like : SBI personal loan, hdfc personal loan, axis bank personal loan, ICICI Bank Personal Loan etc
Originally published at https://www.thebaynet.com.