What will happen if an emergency strikes and you have zero funds to manage it? This can happen owing to various reasons like medical emergencies, kid’s marriage, their higher education, etc. Here is where a personal loan can come in handy. A personal loan by nature is unsecured meaning you can borrow funds without pledging any collateral to meet your financial needs.
However, before you hit the personal loan apply button, note that you will now have to bear a higher personal loan interest rate. This is because the RBI (Reserve Bank of India) in its MPC meeting on June 8th, 2022, enhanced its repo rate to 4.90 per cent. Post increase in repo rate, all lenders offering floating rates have also increased their loan rates. Despite an increase in loan interest rate, you can still avail a lower personal loan interest rate in the following 4 ways –
- Have a good credit score
A strong credit score of 750 and above can assist you to boost your personal loan eligibility and enhance your chances of availing a lower interest rate on a loan. Such a score is backed by a good credit repayment history, length of credit accounts and other crucial parameters. As a good credit score shows you as a credit responsible individual, ensure to maintain a good score to improve your personal loan eligibility chances. It also allows the lender to offer a lower personal loan interest rate due to lower credit risk.
- Timely repay your credit card dues and loan EMIs
Lenders not just check your credit score but even assess your past loan repayment record before deciding on your personal loan interest rate. They often prefer to lend to those who have not defaulted on their credit repayments. Few may offer personal loans to defaulters; however, they may do so at a higher personal loan interest rate to compensate for the higher credit risk.
Thus, ensure to maintain a good and disciplined loan repayment behaviour to enhance your loan eligibility chances at a lower personal loan rate.
- Make use of your banking relationship
If you have a long-term banking relationship in the form of a fixed deposit, savings account, recurring deposit etc., you may be able to avail a personal loan at a reasonable interest rate. You can keep this as a benchmark to negotiate with other lenders and zero on the one offering the best personal loan deal.
- Compare amongst different lenders
Never avail a personal loan from the lender whom you approach first. Ensure to check the personal loan rates of as many lenders as possible to select the best one as per your requirement and suitability. For choosing the best lender, you may consider using a personal loan EMI calculator to compute the EMI and interest rate as per your budget. Once you have calculated your EMI and preferred personal loan interest rate through the personal loan calculator, you can negotiate with the lenders that have approved your personal loan application to avail a better rate as per your suitability.
If you want to apply for a personal loan, you must first approach the financial institution with whom you share a banking relationship to know the best rate it can offer you. Next, visit online lending marketplaces to search for the lender offering the best personal loan rate as per your suitability. Once you have compared all the lenders, zero on the one offering the required loan amount at the lowest interest rate and processing fees. To decide on the best lender, you may use the personal loan calculator.