Pro Tips for Obtaining a Personal Loan at the Lowest Interest Rate!
Instant personal loans are one of the most popular financing options today. They are the go-to option when you need immediate funding for diverse reasons. Personal loans are unsecured advances that require no collateral and are provided against a handful of eligibility criteria. This makes these loans high-risk lending instruments, because of which lenders often levy high interest rates on these loans. But with a few smart financing tips, you can obtain a personal loan at the lowest interest rate.
You can easily download an instant loan app to check out the current interest rates offered by different lenders. This will give you a fair idea about the prevalent interest rates. However, you can avail a personal loan for even lower interest rates with these amazing financial hacks.
Read on to discover 8 pro tips to get a personal loan at the lowest interest rates.
8 Pro Tips to Obtain the Lowest Interest Rate on Personal Loans
- Compare lending institutions
To get the lowest interest rate on your loan you must first know about the best offers available in the market. Compare different lenders and check their offers in details. You can make a list of reputed lender and list down the interest rates offered by each. You can also compare the interest rates offered by the instant loan apps.
- Maintain a high credit score
A high credit score indicates high creditworthiness. This score is influenced by different factors like previous credit habits, including the likes of repayment discipline, types of borrowings availed, on-going debts etc. You must check if your credit score matches this minimum threshold mentioned by the lender. In case, your credit score is low, you need to take necessary steps for improving your credit score well within time.
- Check pre-approved offers
Pre-approved offers on instant personal loans are often provided to existing customers with an aim to make financing quick and convenient. So, if you have already availed a loan in the past, then you might check for pre-approved offers. They may offer you lower interest rates, if you have repaid your previous loan on time. In addition to that, you can also check with the bank where you maintain your salary account. They too may offer you pre-approved loans with great benefits.
- Look for festive offers
Another great way to secure the loan at the lowest possible rate of interest is to look for available offers. Usually, during festive seasons market competition is at its peak and the lenders may provide attractive loan offers. So, if your loan requirement is not urgent, then you might want to wait for the festive time. Download an online loan app to keep a tab on these offers.
- Pay off your debts and reduce existing liability
Existing liabilities are one of the crucial factors that impact your interest rate levy as it directly relates to your risk profile. A high existing liability means high risk, and there is a higher chance of loan default. Due to this, the lender tends to levy high interest rate on your loan. Hence, it is smart to pay off your liabilities before applying for an instant personal loan to get the best rates.
- Maintain your credit utilisation limit under 30%
Another crucial aspect that impacts the interest rate is the rate of credit utilisation. It is ideal to maintain your credit utilisation ratio under 30%. If you exceed this limit, then you must make sure to pay off your credit card bill before the due date. This way, your credit score will not get impacted.
- Document all income sources
You can also leverage your income capacity to secure the lowest rates on your personal loan. Though most lenders approve your loan based on your primary source of income, it is ideal to reveal your secondary income sources as well. This may include rental income, income from investments, passive business income, freelancing gigs etc. Having multiple sources of income diversifies the lender’s risk and you may negotiate for the lowest rates.
- Leverage your employer reputation
Your employment badge can help you secure an instant personal loan at the lowest interest rate. If you are employed with a reputed company MNC or a private/public sector company, then the lender may offer you better terms on your loan. Since these employees have better income stability and higher repayment capability, the lenders risk is minimized. That’s why they tend to offer their loan products at reduced rated.
- Add a co-applicant on your application
Another simple way to avail a personal loan at low interest rate is by adding an eligible co-applicant to your loan application. Make sure your co-applicant has a good credit score, meets the eligibility criteria and has a stable income. Since, the burden of loan repayment is divided among the two, the risk is diversified. Hence, the lender may offer you the loan at a lower interest rate.
- Choose between fixed and floating rate systems smartly
At last, when signing your loan agreement, you get to choose between fixed and floating rates of levy on your personal loan. Choose between these two cautiously based on the current and expected trends in the market. Ideally, fixed rates are set a notch higher than floating rates while the latter is subject to market rate volatility.
Personal loans do come at a higher interest rate. But with these smart finance tips you can negotiate the interest rate and avail the instant personal loan at a much lower interest rate.
Once you have availed the loan, you can further attempt to reduce your total interest liability. Prepay your outstanding loan liability in part or in full before the tenure’s end. Such prepayment helps pay off the loan principal before the scheduled duration, thus bringing down the total interest accrual.
Another way to save on your interest once you have availed the loan is to go for a balance transfer. A new lender may offer you the loan at lower rates of interest. Well-planned borrowing with these smart tips can help save significantly on your loan repayment.