With a personal loan, you can fund your big-ticket expenses incurred on weddings, education, home refurbishment, and various other financial exigencies. However, you cannot use the proceeds for meeting any speculative purpose. To optimise your experience as a loan seeker, you must look out for distinct benefits offered by a lender like online application, flexible repayment tenure, and swift disbursal facility.

Besides this, you must also watch out for the personal loan interest rates and processing charges offered to you. Always ensure to opt for the lowest personal loan rates and processing charges as doing so would allow you to reduce your overall interest cost on a loan by a huge margin.

Discussed here are some tips you must be well-versed with before hitting on the personal loan apply button to avail lower personal loan rates.

  • Hold a strong credit score

A strong credit score of more than 750 may help you to avail a personal loan at a lower interest rate. This is because a lender considers you as creditworthy if you have a higher credit score. In contrast, if you have a lower score of less than 750, you are considered credit irresponsible as this score reveals a high chance of you missing your loan repayments in the future. Thus, lenders may either turn down or charge higher personal loan rates to make up for the enhanced credit risk.

As the need for a personal loan is usually unannounced in nature, assessing your score right before applying for the loan might not be helpful. Thus, make sure to form a habit to assess your report regularly. Doing so will assist you take the right measures to maintain a good score. Periodic assessment of your score will even help you figure out mistakes, if any, in your report and instantly address them to the concerned bureau and lender for quick rectification. A corrected report increases your score automatically.

  • Assess the interest calculation method

You might still pay a higher interest rate on a personal loan despite the lender providing a lower rate. Wondering how? This is owing to their interest calculation method. Thus, before you choose a lender, ensure to review the lender’s interest calculation method.

Lenders offer a personal loan depending on two methods – reducing or flat rate method. In a scenario of a flat interest rate method, the overall interest constituent is calculated depending on the overall loan proceeds across the repayment period. However, in the case of reducing interest rate method, the interest is computed on the outstanding principal of the loan.  

  • Make use of your banking relationship

Holding a bank account and then a fixed or recurring deposit account with the same lending institution could help you develop a better relationship with the lender. An advantage of this could be better interest rates when the requirement for a personal loan comes up.


After you have zeroed in on a preferred personal loan lender, ensure to calculate your EMI and tenure for a personal loan based on your available repayment tenure, required loan proceeds, and offered interest rate. For computing accurately, you may use an online personal loan EMI calculator. Such calculators permit you to calculate your loan EMI in just seconds as per your repayment potential and cash inflow.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.