‘Everyone wants to get more and pay less’. This is human nature and no one can deny this fact. The same is true when you borrow money either from a private money lender or form a bank. No one will go with an interest rate of 10% when the same is available at 9% with a different lender. However, getting the best rate for your personal loan is not as easy as it seems. The first step which any borrower does nowadays is looking for a low-interest loan. For this, they shop around and compare the same product with different lenders. But, do you know there are more ways by which you can get the best rate on your personal loan. Let us see how you can?
Top 7 Ways to Get the Best Rate on Your Personal Loan
- Improve Your Credit Score
Personal loans are unsecured loans and lenders are at high risk. To minimize their risk lender check for the credit score of the applicants. The Credit score shows the financial history of the applicant. Lenders lend a personal loan easily to those who have a good credit history.
Applicants with a good credit score also get a rebate on the interest rate. So, if an applicant wants to get the best personal loan rates, he/she needs to maintain a good credit history and a high CIBIL score.
If someone wants to avail a personal loan they should first check for their credit score which is available with all the credit unions and can also be checked on the online portals such as Finance Buddha and Money tap.
In case if one’s credit score is not good in that case, they should wait for few months for getting their credit boosted. For boosting credit score you can read- https://financebuddha.com/blog/clean-credit-report-2018
Sometimes checking your credit reports for errors and fixing any mistakes also works.
Making on-time payments
Keeping credit card balances low to give your credit score boosts
These financial habits will help you improve your credit score in no time. Remember- The higher your credit score is, the lower your personal loan rates likely will be.
- Don’t Go to the Bank Frequently
Nationalized banks are often the first lenders that come to mind of everyone when planning to go for a loan. Many times they do find it valuable to offer personal loans only when their profit is more. Hence they generally approve for a larger amount loan or when approve a small amount loan they ask for a comparative a bit high-interest rate. This is a fact and only a few are aware of it. so, if you want the best rate on your personal loan and the amount is less then you can apply with private banks such as HDFC, ICICI and NBFC’s such as Tata Capital and Bajaj Finserv.
- Search Online
It is also possible that you may get the best rate for your personal loan on the internet. There are a number of digital lenders available, who offer better terms than their brick-and-mortar counterparts. The eligibility criteria of these FinTechs are a bit liberal and one can get a personal loan that to at best rate from the. But you need to research and then apply.
- Go for a Shorter Personal Loan Term
The faster the lender gets their money back, the less risk they consider their lending. This is the reason because of which lenders often offer their best personal loan rates for short-tenure loans. Generally, a personal loan is of low tenure but keeping it even shorten can give you the best rate for your loan.
A low-interest matter a lot, even if you get some point difference in your interest rate then you can save a lot. This doesn’t mean you should go for a short tenure loan without thinking. A short tenure will generally increase your monthly EMI. Hence, think twice before you decide. If you want to get low personal loan rates, try to choose the shortest personal loan term. Remember it’s always important to keep your monthly payments manageable.
- Check for the Total Loan Cost
When you’re looking to get the best personal loan interest rates, it’s is equally important to know that there are certain other things which are equally important to keep your eyes on in terms of a personal loan interest rate. It can happen that you were focused and looking for the best interest rate for your loan and you forget about other factors which can affect its total cost.
Don’t forget to look for the different additional charges which are applicable to your personal loan. It can be processing the charge, late payment charge, prepayment, and part payment charges.
if these charges are high and you are getting a bit low-interest rate and it may be of no use. As the total cost may be more including these charges.
Always use personal loan EMI or payment calculator to know the actual cost of your personal loan.
- Check the Annual Percentage Rate (APR)
APR, the annual percentage rate is an important thing which one should look for when going for a personal loan. But many of us are not aware of it. Generally, a shorter tenure loan at a higher rate works out to be cheaper, than a longer tenure loan at a lower rate. Annual percentage rate (APR) is the annual rate charged for borrowing hence it is an important factor to always consider before you borrow.
- Opt for Floating Interest Rates for Your Personal Loan
Floating interest rates are those in which the interest rate varies with the market fluctuations. People while going for a personal loan generally choose fixed interest rate as they think they are at the quite safer side while choosing fixed rates.
But the fact is, fixed interest rates usually starts with little higher points than the floating one. But it remains the same throughout the tenure. On the other hand on the variable rate, the interest rate offered is a bit lower but gets adjust with current interest rates. Opt for variable rates on your personal loan
Still, choosing a variable rate can help you secure a lower personal loan interest rate. It will make the most sense for short-term personal loans, which you’re likely to pay off before your rate gets too high.
Thus, if you want the best rates for your personal loan you can go this options.
Even a little relief on your interest rate for personal loans can help you a lot to save some and add to your finances. Hence, never leave any scope and try your best to get the best one. Don’t forget to implement the above-mentioned tips, these will surely help you to get the best rates for your personal loan.