If you’ve ever applied for a personal loan or plan to apply and are wondering about lower interest rates, then we are here to guide you. But first, let’s beging with understanding ‘what is personal loan’? Basically, personal loans are unsecured loans that can be availed in times of emergency. Since these loans are unsecured in nature (the borrower doesn’t have to show collateral to get the loan), they attract higher interest rates.
Sometimes, personal loan interest rates can be really high. You might end up paying a huge sum of your hard-earned money as the interest amount. However, there are ways to negotiate lower interest rates from the lending institution(s). You can check the Airtel Thanks app to check out their personal loan offers in the shop section.
We will discuss a few of these methods in the blog today.
Tips for getting a lower interest rate on your personal loan
Read the following ways to negotiate a better interest rate on your personal loan:
A good credit score
You might have heard it already, but we will say it again. A good credit score is very significant to get a personal loan approved and getting a lower interest rate. It is one of the first things a bank or any other lender will look at in your loan application. Your credit score is an indication of your creditworthiness. Since the loan is unsecured, your credit score vouches for you in front of the lender.
If you don’t have a good score, your application might even get rejected. Even if it is approved, you will definitely attract a higher interest rate than normal.
Be it a small loan or a postpaid bill, you need to be on time with all your credit payments. Every missed due date or less payment is considered when it comes to a personal loan application. If you have not missed any dues and are on top of your credit usage and inquiries, your lender will know that you can be trusted to pay back the loan amount.
This will help you negotiate a lower interest rate. You can talk to the lender directly and ask for a concession citing your good payment history.
Relationship with the lender
It is always recommended by experts to apply for a personal loan with which you have an existing relationship. The bank or lender is already aware of your credit or lending behavior. Additionally, customers of the bank get better discounts and personalized offers. Therefore, always try to get a loan from your salary or savings bank.
Method of interest calculation
Every bank has its own set way of calculating interest for a personal loan. The method can affect the interest amount for you. It won’t matter if you have a low-interest rate. You might end up paying more by the end of the tenure. To give context, lenders offer loans at two rates – flat interest rate and reducing interest rate. Under a flat interest rate, the interest is calculated on the whole principal amount. Whereas for reducing the interest rate, the interest is calculated only on the outstanding amount. The reducing interest rate can help you save on the interest amount.
Ask the lender beforehand to make an informed decision.
Stable employment history
If you often switch companies and work with lesser-known companies, there’s a high possibility your loan might get rejected or even attract high-interest rates. An employee with long and stable history with an employer shows the lender that they will be capable to pay off their loans every month on time. Employees working at a reputed company are also favourable for the lender.
In a nutshell, be an ideal borrower, look out for seasonal or customized loan offers, compare interest rates, know the interest calculation method, and generally be on time with your payments to negotiate a lower interest rate for your personal loan!
Don’t forget to check out the financial services category of the Shop section in the Airtel Thanks app to get an instant personal loan of up to Rs 8 Lacs with minimum documentation.