If you are on the lookout for a Personal Loan, then we are sure you must be looking for some low-interest options such as Bajaj Finserv Personal Loan. And why not? After all, a low rate of interest can help you save thousands of rupees that you would need to shell out for a loan with a higher percentage of interest. However, before you set on the journey to do so, make sure you know about the factors that determine the Personal Loan interest rates.
To begin with, your overall equated monthly instalment (EMI) outgo should not exceed 40% of your monthly income. This assures the lender of your ability to repay the loan, and in turn, they may choose to offer you a low-interest loan. Besides, if you have exhibited an excellent financial discipline which is supported by your repayment history, you can again expect to get a Personal Loan interest rate of less than 15%.
Now that you are aware of the factors which play a role in determining the interest rate on your loan let us guide you with three crucial steps that you must take in order to procure the most cost-effective credit type possible!
Before Applying for a Personal Loan or any loan for that matter, it is crucial for you to know your credit score, since a good or bad score can make all the difference. You can get a copy of your credit report from one of the three leading credit bureaus in India. If your score is 700 or above, you can rest assured of getting the loan at competitive rates. However, if your score is less than 700, you might have to pay a higher interest rate. In this case, it is best that you wait for 4-6 months, and try some of the proven ways to improve your credit score during this period. Of course, if your financial needs are urgent, you may have to opt for high interest loans only.
As mentioned above, your overall EMI should be less than 40% of your monthly income. Hence, if you are already servicing a loan, you must prepay it before filing your loan application. Not only will it help you in getting a swifter approval on your application but will also ensure that you are eligible for a higher loan amount, and all of this at significantly lower interest rates. Having no or just one debt under your name will encourage the lender to see that you are a financially sound individual and will be able to pay the loans.
To analyse your ability to repay, you can make use of a Personal Loan EMI Calculator and look at the EMI amount that you will be required to pay for a specific loan amount. If it is beyond your means to pay the same, you can either increase the tenure of your loan, or decrease the loan amount, or even do both.
This is possibly the most crucial step that would help you land a low-cost loan. Make sure to look for more than just a couple of offers, and analyse them all. More often than not, the rates and other terms and conditions of the loan would vary from lender to lender. Even if the rates seem similar, the terms of the loan pertaining to upfront charges and prepayment penalties might vary, which in the long run may have a significant impact on the overall cost of your borrowing. This will help you avoid lenders who focus your attention on the seemingly low-interest rates, without letting you dive deeper to analyse other related costs.
You can estimate the interest loan of your loan, before filing your application. Wondering how? Well, let us spill the beans for you.
All you need to do is share some details about you and your employment, Such as Name, Date of Birth, and Contact Information along with the source of your income. That being done, the lender can quickly run a soft check and determine your creditworthiness. After the check is run, the lender will inform you whether or not do you qualify for the loan, and if you do, what is the interest rate that will be levied by the lender. If you find the rates appealing enough, you may go on to actually apply for the loan. If not, you could either approach a new lender or improve your credit score to get a better rate. On the basis of the indicated rates, you can quickly estimate the EMI for your desired loan amount by using a Personal Loan EMI Calculator.
Of course, there might be a slight difference between the rates indicated during the soft check, and the actual rates levied on your loan. However, the soft check will let you know the interest rate bracket that you fall in so that you can make an informed decision.
Simply put, all you need to do is enhance your creditworthiness and find a lender who can readily offer the most competitive interest rate possible, and you will finally be able to get a Personal Loan at a relatively low-interest rate.
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