Step By Step Guide To Avail A Personal Loan At Low Interest Rate

An urgent monetary requirement can crop up uninformed anytime. One of the viable ways to address such immediate needs is by availing of a personal loan in India. Lending institutions, including NBFCs, have made credit availing processes less stringent with low personal loan interest rates and other exclusive features.    

Since the past few months, there has been an upward trajectory in the demand for this financial product, primarily driven by salaried borrowers. 

  • The personal loan growth witnessed a 13.3% y-o-y surge in July end, 2020, touching around Rs.7.22 trillion.
  • NBFCs and commercial lending institutions together recorded the personal loans book at Rs.5,07,684 crore, till August 2020.   

While loan rates are currently reasonable, you can further lower the personal loan interest rates by following a few tips.      

Step by step guide to avail low-interest personal loans 

  • Qualify as per the eligibility criteria   

In the case of personal loans, eligibility criteria function as a sieve to identify a credible borrower. Make sure you meet all the parameters laid by your chosen lender, such as –

  • Age should be at least around 23 years, and the upper limit is around 55 years.
  • Salaried employees qualify for a minimum monthly income that primarily depends on the place of residence. 

For example, applicants from Nagpur, Jaipur, Cochin, etc., should earn at least Rs.28,000 per month to qualify for this loan. Again, those from Noida, Ghaziabad, Bangalore, Chennai, etc., should have a minimum monthly income of Rs.35,000. 

Being eligible qualifies you for not only a higher loan amount but also a low-interest rate. An online personal loan eligibility calculator can best help evaluate the loan amount you qualify for based on such parameters. If you fail to meet all criteria, the lender may sanction a personal loan but at a higher rate of interest, considering you as a risky borrower.  

  • Calculate the monthly outflow towards loan repayment   

Loan repayment procedures usually begin after the 1st month of availing it and in equated monthly instalments (EMIs). EMIs, comprising a certain portion of principal and interest payable, need to be serviced until the tenor ends. Hence, calculating this monthly outflow is crucial to pay EMIs on time comfortably and without defaulting. It also helps you plan your EMI payment better.  

The easiest way is by using a personal loan EMI calculator online. Once you enter the preferred loan amount, tenor and applicable interest rate, the tool instantly displays the total interest payable, cost of borrowing and EMIs. Here are some tricks for a low-interest rate on personal loans –

  • Choose a shorter tenor. This helps lenders to peg you as a low-risk borrower, and they confidently sanction funds and that too at a lower rate. 
  • If you select a shorter tenor, it brings down the total interest payable, thereby increasing the EMI amount. 

Choose a suitable repayment schedule and EMI according to your financial capabilities and obligations. Here, knowing how to use a personal loan calculator properly can help in making an informed decision.    

Other ways to reduce loan interest rates 

Besides the above-mentioned steps, there are some other tips to avail of affordable personal loan interest rates. 

  1. Maintain a CIBIL score above 750. The closer you are to 900, the better are your chances of low rates. Check out a few things you can do to improve your personal credit score.        
  2. Make sure your credit profile does not feature negative factors like loan defaults. A good financial discipline, proper credit mix, timely bill & EMI payments and other such factors make your credit report stronger. 
  3. Try to maintain a FOIR below 30% – 50%. It is the ratio of your fixed obligations to your income. Reduce your existing debts for a better deal. 
  4. Negotiate with the financial institution for low rates of interest. 
  5. Provide an additional source of income. It strengthens your financial stand and makes you more eligible for a reduced rate of interest.  
  6. Try to maintain employment stability at a reputed company or organisation. Lenders consider this factor to assess your repayment capability. 
  7. Approach financial institutions which you have dealt with before, as relationships go a long way. Besides personal loan interest rates, they also provide exclusive offers to their existing customers like pre-approved offers.   

Pre-approved offers extended by top NBFCs in India like Bajaj Finserv simplify the process of availing loans and save a significant time. Such schemes are provided on a variety of financial products, including personal loans, business loans and credit cards. To check your pre-approved offer, enter basic details like your name and contact number.  

Note that any risk factor in your eligibility profile may translate to a high rate of interest on the unsecured personal loan.

  • The growth of active loans recorded as of March 2020 is close to 60%.    

With technological developments, the method to avail small personal loans has become hassle-free. Eligible individuals can complete the processes through online application forms and minimal documentation. By employing the aforementioned tips, you can make your cost of borrowing more affordable with low personal loan interest rates.

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