How to Get Better Personal Loan Interest Rate from Bank of Your Choice?
A Personal Loan can be your best bet for fulfilling life long aspirations. Neither do you need collateral nor a guarantor to qualify for an unsecured loan. It has become easier, cheaper and faster to apply for Personal Loans in India, particularly in the last few years.
Let’s figure out how to become eligible for the better interest rate on Personal Loan from a bank or NBFC of your choice.
How to get a better interest rate on a Personal Loan?
1. Credit Score:
Your credit score is a numerical assessment of your creditworthiness. In other words, your CIBIL Score or Experian Score lets the lender estimate the likelihood of loan repayment risk. The better is the sore, the better prospect you are for the bank/ NBFC. Thus, one of the foremost aspects to get preapproved for a low interest rate on Personal Loan is your credit score. It is recommended to maintain a score of 750 or above before submitting a loan application. Each individual is entitled to a free CIBIL report annually. You should pull out your credit report online and know your credit score before negotiating for Personal Loan Interest Rate with the lender.
How to build a score? The credit score is built basis your past credit and repayment history. Every credit product, i.e. a loan, credit card or purchase on EMI, is recorded in your credit information report, which is maintained by a Credit Bureau. The banks and financial institutions report your credit repayment history to Credit Bureaus, and they update your rating periodically as per you credit history.
Thus, it does matter how much credit limit you utilise each month. Your credit spending and repayment habits impact your credit score. In case you have a lower score you should consider improving the score.
2. Monthly income:
To get approved for a bank loan, you ought to have a valid proof of income. Your salary should be debited to your bank account, and you should possess salary slips/ certificate to prove the same to the lender. As for self-employed individuals, they should have a previous year’s ITR document & proof of business establishment to prove the income & source. In all probability, the Eligibility for a Personal Loan amount is purely dependent on your monthly income.
3. Job security or business continuity:
Furthermore, there is always a preference for borrowers serving CAT A companies and government employees. The bank would like to ensure that your job is a secured one and there is minimal risk in lending to you. Thus they will be assessing your employer’s reputation before approving the loan application. Likewise, a self-employed individual may be required to prove the continuity of business. The business needs to submit consecutive years’ ITRs to establish business continuity.
4. Debt-to-Income ratio
Knowing your income status, the bank would be interested in evaluating how many credit accounts you currently hold. The overall debt to income ratio will be assessed to understand the situation of your cash flows. In all probability, if your debt to income ratio is low, i.e. below 30% of take-home income, the bank is assured of timely EMI payments. If your 40-50% of monthly income is exhausted by the monthly EMIs & card bills, it will not be possible to borrow at a low interest rate. To borrow at a better Personal Loan interest rate, make sure your monthly repayment load is very low, i.e. 10-15% of range.
5. Past relationship with the lender:
Your past relationship with the lender can substantially help you lock the best rate of interest. For, your existing lender is the testimonial of your good repayment history. Thus, if you have already been serving a Car Loan with HDFC Bank, you are more likely to get the best Personal Loan interest rate offer on HDFC Personal Loan than ICICI Bank. So always contact the previous lender for good interest rate quotes.
6. Mode of application:
In this digital age, particularly after COVID 19 disruptions, banks have actively started developing their APIs to facilitate online applications and serve the contactless applications. Top lenders like SBI, HDFC & ICICI banks are offering discounted interest rates for digital loan applications. Thus if you choose to Apply for a Personal Loan Online, you can save more on the interest rate. You may also enjoy cut in processing fee and other miscellaneous costs by applying online.
7. Tap exclusive offer:
Last but not least, the more you research, the better deals can you seal. Use professional help, compare various bank offers and explore seasonal deals. Most banks and NBFCs offer special offers multiple times during a financial year, for instance, before festival season, school summer holidays & more. So keep a tap on the available deals and make the most of available offers.
Keeping tap of all these points, you can surely get a better Personal Loan interest rate from the preferred lender with minimum hassles.
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