People Try to borrow Best Rate of Interest Personal Loan to cover a variety of general expenses such as medical bills, home renovations, children’s education, exotic vacation, daughter’s marriage etc. Like car loan, credit cards, mortgage and home loan, personal loans also come with interest rate. Personal loan rates are usually lower than rates on other secured debts, like credit cards. Currently the average interest rate applicable on a personal loan (12%-16% per annum) is much below the average interest rate on credit cards (2.5% to 3% per month).
What does the best loan rate mean?
Apart from other reasons, the best loan is often the loan with the lowest APR (Annual Percentage Rate). The lower the APR, the less you will pay.
Here are some tips to get the best rate on your personal loan:
1. Improve your credit score
Lenders assess your eligibility for a personal loan based on your credit score. If you have proven record in maintaining your financial responsibility, you are most likely to have a good credit score. The higher your credit score, the more chances you have of getting a personal loan at lower interest rate.
However, if your credit score is not as good as it is required to be, you can improve it in months by following these steps.
- Pay off all your credit card outstanding dues before the due dates
- Make sure that any errors in your credit card report are appealed and corrected.
- Never exceed more than 30% of credit utilization because this will establish your credibility for financial discipline and management
2. Shop around for the Best Deal
Each bank/lender has different criteria for approving a loan, so try not to get carried away and take the first loan you see. Get rate offers from different lenders. Some lenders will offer a much higher rate of interest than others, so it’s worth shopping around.
Also remember that interest rate is only the beginning and doesn’t necessarily give you a big picture of what does your loan cost. The fees and type of interest rate should also be considered along with the rate percentage so that you can compute the cost of the loan throughout the term.
3. Compare Personal Loan APRs – not just base rate:
The Annual Percentage Rate (APR) gives you a better idea of what does your loan cost i.e. it refers to how much you will repay each year. However, keep in mind that penalty charges for things like prepayments or late payments usually aren’t included in the APR. If you think that you will pay off your loan ahead of the defined tenure, consider looking for a loan with no or lower prepayment fees.
4. Choose for shorter personal loan tenure
If you want to avail personal loan at cheaper interest rate, try to choose short personal loan term. Opt for the shortest loan term that allows you to borrow the amount you need and won’t eat a big chunk of your monthly salary in the form of EMI.
5. Don’t apply for multiple loans at once – use soft searching instead
If you’re looking for a loan, avoid the temptation to apply for several loans with various lenders at once. Multiple loan applications can damage your credit score and you are less likely to be offered the best loan rate even if you had been maintaining a good credit score and managing your repayments in a disciplined manner. To avoid this, borrowers should use online tools which use just the key information about you to tell you which products you are eligible for. Soft searches are not seen by lenders so you can try this as much as you want.
6. Add a co-applicant
If you have a poor credit score, your loan application may get approved but on higher interest rates. One way to avoid this is you should consider opting for a joint loan with someone with a good CIBIL score. When you add a co-applicant to your personal loan application, lender considers your and co-applicant’s credit history and financial status. Making a woman the principal loan holder would attract lower interest rates.
7. Opt for a Secured Loan
Although, a personal loan is an unsecured loan that doesn’t require any collateral, you can pledge any collateral or asset like land, gold, fixed deposits etc. An asset acts a guarantee of the personal loan, lowering the likelihood of risk as lenders can retrieve if you are unable to repay. Also, many lenders provide loan at lower interest rate when it is secured by any asset.
For more Information about CIBIL score and personal loan, you can go over to personal loan page on Afinoz.com.
8. What is Afinoz?
Afinoz.com is India’s foremost online financial marketplace for availing loans and investments. Our main objective is to make the process of getting a loan or making an investment safer, convenient and hassle-free for individuals. We work with public and private banks, NBFCs and mutual fund houses across the entire country and offer an unbiased quotation on financial products. You can contact our team to get more information or apply for a loan or investment by calling on +918795021552 or by emailing at email@example.com. Afinoz.com provides solutions which are quick, reliable, transparent, confidential and above all free.