When it comes to an ideal credit instrument for fulfilling diverse financing needs, nothing fares well like a personal loan. These advances are security-free, easily accessible and come with unrestricted end-use. Today, you can download a personal loan app on your mobile and apply for a loan in a few taps. This eliminates the need of visiting the branch, submitting several copies of your documents and waiting in the long queue to talk to the manager. Personal loan apps have really changed the landscape of personal financing.
But the only catch about these cash loans is the high interest rate. Personal loans are unsecured loans. The lender does not seek any collateral on these loans. This makes these loans very high risk debt tools for the lender. In order to balance this risk, lenders often levy high interest rates on these cash loans.
Thus, it is only financially prudent to look for ways that will help you bring down the final interest rate on these cash loans. With a few smart financial hacks, you can avail a personal loan at a much affordable interest rate.
Here are some of the most useful tips that will help you secure the lowest possible interest rate on your loan.
Top Tips to Avail a Low Rate of Interest on Your Personal Loan
A personal loan is a very useful financial tool that can come handy in many situations. But before availing this cash loan you must make sure that the interest rate does not drain out your finances. Availing a loan at a lower interest rate can help you save big on the total interest pay outs. It can also reduce your monthly EMI burden and enables you to choose shorter loan tenure.
Here are some of the top tips that will help you avail a loan at a low rate of interest:
- Meet the lender’s eligibility requirements
Every personal loan provider lays down a set of minimum eligibility requirements that you must fulfil to avail the advance. Fulfilling all these requirements can help you secure a lower interest rate on the cash loan. This is because lenders consider such candidates as low risk profiles and they are open to offer you a concession on the interest rate.
Note that when applying with platforms like personal loan apps, you will likely need to meet just a handful of requirements. Ideally, the eligibility criteria you need to fulfil revolve around your age, your monthly income, credit score, employment and city of residence.
- Submit all primary and secondary income sources
If you have multiple income sources then it is wise to mention all your income sources in the loan application. The higher your income, the more you will be eligible for the loan. In addition to this, having diversified income assures the lender of continual repayment even in the cases of job loss. This increases security enables them to offer you the loan at lower interest rate.
Make sure you have all the necessary documents as prove of your secondary income. Whether it is rental income, income from investments, business income or freelancing income, make sure to have the necessary papers to prove your income.
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- Compare interest rates from various lenders in the market
Different lenders will offer you’re the loan at different interest rates. Even though the difference may be in point percentages, it can bring a huge difference to the overall loan liability. It is thus ideal that you compare loan offers from available lenders, including platforms like personal loan apps.
Knowing the lowest interest rate in the market will also help you negotiate with the lender of your choice. Make sure to do your research and settle for the one that offers you the best loan terms.
- Take measures for credit score improvement
Your credit score represents your overall creditworthiness. It also represents the risk associated with your borrowing profile based on your past credit behaviour. That’s why, lenders pay crucial attention to your credit score. They are also more likely to offer you better loan terms and low interest rates if you maintain a high credit score.
Make sure that you know the factors that contribute to your credit history and score creation. Your repayment habits, current debts, credit card usage and total liabilities affect your credit score.
- Check for special offers
When seeking to get the lowest interest rate on your personal loan, you must also look out for special offers. These offers are typically available during the festive seasons. These are the times when lenders offer personal loan at the lowest interest rates.
So, if your loan requirement is not urgent, then you might want to wait for the offer period. This will help you save big on the interest rates and bring down your total repayment burden.
- Apply with a lender you have pre-existing relations with
If you have pre-existing relationship with a lender then you can leverage this relationship to negotiate for the lower rates on your personal loans. If you have been regular with your payments then the lender would be more open to offer you the loan amount with favourable terms.
In addition to lower interest rates, they may also waive off your processing fees and offer discounts on other fees. Your paperwork also gets simplified when you apply with an existing lender.
- Leverage your employer reputation and employment stability
If you are employed with a reputed company then you may get a loan at lower interest rate. Many lenders offer pre-approved loans to employees working at MNCs or government jobs. The high job security and regular monthly payment offered by these institutes lower the chances of loan defaults.
In addition to this, your job stability also plays a critical role. Many lenders check that you must be employed with the current lender for at least 6 months to 1 year. You can negotiate better interest rates if you have a good employment badge.
- Choose between fixed and floating interest rate levy system smartly
You can also choose between fixed and floating rate levy systems smartly to get the lowest rate on your personal advance. Note that fixed rates are ideally higher than the floating rates. But the latter remains subject to the market variations.
Hence, you must check the rate levy trends in the market before making a final borrowing decision. Make sure to read the fine print and know these financial terms in details to make an informed decision. You do not want any surprises after signing the dotted line.
Conclusion
Availing a personal loan can be a smart financial decision, if you do your research right. Follow the above mentioned steps, to negotiate your interest rate and avail the cash loan at the best rate possible.
With platforms like personal loan apps, it only gets easier to secure the best mix of interest rates and other loan features. Further, know that online applications are easier to process and bring fast approval. This serves best when seeking quick financing.
