20 JULY, 2022

Collateral-free nature, flexible repayment tenure, no end-use limitation, online application, and quick disbursal – all this makes a personal loan one of the most useful financing options for dealing with any sudden financial crisis.

 

However, since personal loans are secured loans with no collateral, the interest rates are usually higher. Hence, just securing a personal loan is not enough. The key here is to get the best personal loan with the lowest interest rate possible to ensure convenient Equated Monthly Instalments (EMIs). And here are some smart financial habits that can help you get an affordable interest rate on a personal loan.

 

  • Improve your credit score

 

Your credit score is what lenders use to assess your creditworthiness. The higher your credit score, the more likely you are to be approved for a loan and the easier it is to get a competitive interest rate. Usually, a good credit history shows the lender that you can repay the loan in time and that you are a low-risk borrower. You can improve your credit score by making timely credit card bill payments, repaying loans before or on time, not missing out on EMI payments, keeping your debt-to-income ratio low, etc.

 

  • Understand the loan eligibility terms

 

Choose a lender with easy-to-meet eligibility criteria to ensure you don’t waste time applying for loans you are not eligible for. Some common personal loan requirements include having a good credit score, a regular income, and a healthy debt-to-income ratio. By meeting or exceeding the income terms or credit score, you can get an affordable personal loan interest rate.

 

  • Compare interest rates

 

Try to compare the interest rates offered by different lenders to see what Equated Monthly Instalment (EMI) will be the most affordable for you. You can use a personal loan EMI calculator online to estimate your monthly EMIs by entering the required loan amount, interest rate, and repayment tenure. After comparing different lenders, choose the one offering the lowest interest rate along with other favourable terms. If the lender allows a digital application, apply for a personal loan online to get instant disbursal.

 

  • Look for seasonal offers

 

Many lenders offer special deals on personal loans around the festive season and tend to notify customers through SMS and email. By taking advantage of these seasonal offers, you can get limited-period discounts and lower your overall cost of borrowing.

 

  • Maintain a good relationship with your lender

 

Try to avail a personal loan from a lender with whom you have already a banking relationship. It could be through a current/savings account, investments, or fixed/recurring deposits. A good relationship with your lender not only improves your personal loan eligibility but also helps you get a lower personal loan rate.

 

  • Use your professional credentials

 

Try to use most of your professional credentials while applying for a personal loan. Mention all your income besides salary - investments or dividends, rents, etc. This assures the lender that you can repay the loan on time. Thus, the chances of having a personal loan approved at lower interest rates increase. For that, make sure to produce income proofs like income tax returns.

 

To sum up

 

Choosing a personal loan with a lower interest rate is very important to ensure that taking the loan doesn’t throw you off your budget or financial plans. So, make sure to follow the above-mentioned smart financial habits and increase your chances of getting an affordable personal loan interest rate.

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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.