How to Get a Personal Loan with a Low Interest Rate

With a plethora of personal loan options and providers, getting one has become easy and instant. However, getting a personal loan at a low interest rate is still not an easy task.

Personal loan interest rates have a direct impact on your overall borrowing cost. A higher interest rate means higher equated monthly instalments (EMIs), and a lower interest rate means smaller EMIs. Therefore, it is advisable to seek lower personal loan interest rates to ensure convenient repayment.

Personal loan interest rates depend on the borrower’s credit score, monthly income, employment profile, EMI/ NMI (net monthly income) ratio, employer’s profile, applicant’s existing relationship with the lender, and various other factors.

Let us see how to obtain personal loans at a low interest rate.

• Maintain a credit score of 750 or above: Applicants with a credit score of 750 or above have higher chances of availing a personal loan at a lower interest rate. Therefore, avoid making late EMI repayments and clear your credit card dues on time to improve your credit score. Applicants with low or no credit score can also avail of personal loans, but at a higher interest rate.
• Maintain a good repayment record: Try to pay your credit card bills (if any) in full. Clear off your debts by paying the EMIs of existing loans on time. This will help you get the best personal loan deal in the future because lenders will consider you trustworthy due to your good repayment history. Check your credit report regularly and report any inaccuracies in the information to the lender or the credit bureau. 
• Don’t apply with multiple lenders within a short span: Applying for a loan with multiple lenders decreases your credit score and impacts your creditworthiness negatively because lenders perform a hard inquiry on the applicant’s credit report within a short period. Frequent hard enquiries can reduce your credit score, making it difficult for you to avail of personal loans at a low interest rate. 
• Maintain a good relationship with the lender: Lenders frequently offer pre-approved personal loan offers to their reputable customers at preferential interest rates. Therefore, check for any pre-approved personal loan offers with your existing lenders with whom you already have a savings/ current account, credit card, or loan/ fixed deposit account. 
• Compare personal loan interest rates: Explore online financial marketplaces to compare various personal loan offers and interest rates from different lending institutions. Doing some research can help you get a low personal loan rate of interest. 
• Watch out for seasonal offers: Look out for personal loan interest rates during festive seasons, as many banks often launch seasonal personal loan offers where they provide a concession on interest rates or processing fees or both. The best time to get these offers is during Diwali, New Year, or other big occasions.
• Check RBI’s policy updates: Keep a track on RBI’s repo rate cut or other policy changes, as these changes may bring changes to your personal loan interest rates as well.

Maintain a stable employment record: If you are planning to avail of a personal loan soon, you should avoid frequent job changes to reflect a stable employment history. Individuals with an unstable employment profile are a high credit risk for lenders due to their income instability, and hence, they usually don’t get personal loans at low interest rates. It is essential to have at least two years of continuous employment history (including one year with the current employer). 

Employer’s credibility: Individuals working in an MNC or any reputed company have higher chances of getting the most favourable personal loan deals because such an employer has a higher capability to provide you with a stable job and good income than other employers.

The tips mentioned above might guide you to avail of personal loans at low interest rates. Applicants should compare the interest rates provided by various lenders to make informed decisions.