While today, there are different kinds of loan options available in the market to meet the diverse requirements of the people, personal loans have always been the most preferred choice. These are unsecured loans that are offered without requiring any collateral and at the same time, are approved quickly with minimal documentation work. However, personal loan rate of interest is slightly higher than the mortgage loans due to the lack of security. But the markets are flooded with various financial institutions that offer these loans at low interest rates to make it easier for the borrower to repay the entire loan amount. Hence, before applying for a personal loan, make sure to compare different lenders to get the loan at the least rate of interest.
Tips to get a low interest rate on personal loans
1. Maintain a good credit score – Since personal loans are offered without any security, they are approved entirely on the basis of the creditworthiness of the borrower. To maintain a good credit score, you just have to timely pay all your payments and keep your credit history clean.
2. Build a smooth relationship with lender – Sometimes the borrowers are offered discounted interest rates based on their relationship with a financial institution. If you are an old and loyal customer, the lender will offer a low personal loan rate of interest to retain you for as long as possible.
3. Employer’s credibility – All those who have been working at a reputed firm have higher chances of getting a personal loan at a low interest rate. This is because reputed firms provide a regular source of income and hence, the lender gains the assurance that you will not make any default in the payment cycle.
4. Apply during a festive season – In India, the chances of availing a low interest rate, discounts and rebates on personal loans are exceptionally high during the festive season. This is the time when various financial institutions provide a bunch of alluring schemes from which the borrowers can truly benefit.
Things to consider while applying for a personal loan at low interest rate
- Processing fee – Loan providers usually charge a one-time processing fee, which can increase the total cost of the loan. So, while taking a personal loan at low interest rate, make sure to compare this fee charged by different lenders.
- Loan disbursal time – If you need a personal loan due to some kind of emergency, then it is better to consider the disbursal time as some financial institutions take only a day while others take several days to transfer the funds.
- Prepayment charges – Certain lenders also charge a fee when you pay the loan amount before the completion of the tenure. So, you must ask your lender whether or not there are any kind of prepayment charges.
Personal loans are undoubtedly a go-to option for every individual who needs to immediately raise funds. While the personal loan rate of interest is slightly higher than secured loans, you must follow the above-mentioned tips to avail a low interest rate. Also, make sure to compare the other details such as processing fee, prepayment charges and disbursal time of several lenders, before settling down for anyone.
How Personal Loans Help During An Emergency – Link