Getting a personal loan is very easy in today’s day and age, some providers such as FatCat Loans will even allow you to apply for loans entirely online. However, it is important to ensure that the loan that is offered to you comes at a rate of interest that you could deem to be pocket-friendly. In such a way, you can reduce the financial impact of the loan in question considerably.
With that being said, how do you exactly ensure that you get a personal loan at low interest rates? The answer is that you can achieve the same in a total of 5 ways. This article will tell you everything you need to know about the ways in which you can get personal loans at low interest rates. Read on to know more.
Ensure That You Have a Good Credit Score
Your credit score essentially decides the personal loan interest rate that you are offered. Your credit score oscillates between 300 to 900. The higher your credit score is, the better are your chances of getting a personal loan at a lower interest rate. Many financial experts are of the opinion that if you have a credit score of above 750, you can leverage the same to negotiate your interest rate with your borrower. But, if your credit score is below the 750 mark and want to bargain your interest rate on the basis of that, you must consider taking some time to improve it and then apply for the personal loan.
Ensure That You Have a Good Track Record of Repayment
Just like how your credit score is taken into consideration by the lending institutions at the time of reviewing your personal loan application, they also tend to look at your credit repayment behavior. In fact, your credit repayment behavior and pattern is one of the prime determinants of your credit score.
If you have a long track record of making loan repayments on the due date, the lenders will think of you as an individual with a favorable credit profile, which is something that will entice them to offer you personal loans at attractive interest rates. Also, if you are in the possession of a credit card, you must ensure that you repay all of your bills in their entirety and within or before the due date in order to build a good credit history.
Compare Offers from Different Lenders
You must remember that the interest rates at which various lenders will offer you personal loans will not be within the same range. Each and every financial institution has their own unique set of eligibility criteria for the purpose of evaluating potential borrowers. That is not all. While some lenders may be flexible with their respective rates of borrowing, other financial institutions can be fairly rigid in that regard.
It is due to this reason that it is very important for you to compare multiple offers from a wide range of lenders. By doing the same, you will easily be able to determine the personal loan offers that attract the lowest possible interest rate and then subsequently choose to borrow from the lender whose loan you can afford to repay over time.
Opt for a Personal Loan That Uses the Reducing Balance Method
Personal loan interest rates are either calculated on a fixed basis or on a reducing balance basis by the banks. In the case of a fixed interest rate personal loan, your total payable interest amount is calculated on the entire amount of loan throughout the tenure.
However, in the case of the reducing balance method, the interest which will be payable by you over time is only calculated on the principal amount that is yet to be repaid. So, with each Equated Monthly Installment (EMI), your total outstanding balance reduces. Therefore, your total interest burden would be reduced by a significant margin if you opt for a personal loan on which the interest is calculated as per the reducing balance interest rate method.
Maintain a Good Relationship with the Bank
Having a good relationship with the financial institution from which you are looking to apply for a personal loan can also be hugely beneficial for you. Generally, lenders who have a long-standing relationship are more inclined to offer lower rates of interest and at much better terms and conditions. So, if you already have a good relationship with a lender, use it to negotiate a personal loan at low interest in your favour.
With this, you must now be aware of the many ways through which you can get a personal loan at low interest rates. Before you go ahead and apply for a personal loan, remember to always conduct a personal loan eligibility check to see if you qualify for the loan. This way, you can not only save time, but can also prevent loan rejections as well.