Personal loans are easy solutions for immediate financial needs, such as paying hospital bills, funding higher education, or renovating your home. However, high interest rates can make repayment a burden.
Leading banks in India, including HDFC Bank, SBI, ICICI Bank, Aditya Birla Capital, among others, charge interest rates starting from 10.15% up to 30%. That’s why it is important to choose the best loan option, factoring in key aspects like interest rates, repayment terms, flexibility provided, processing fees, and more.
Here are six practical tips to help you secure a personal loan at a competitive rate and make the entire process seamless.
Strive to maintain a fairly high credit score
Your credit score is your financial report card. A credit score above 750 is your ticket to easy, low-interest borrowing. To sustain a strong credit score, pay your credit card bills and EMIs on time. Ensure that you keep your credit utilisation ratio below 30%.
You should also consider avoiding frequent credit card applications and loan requests. Monitor your credit report regularly to identify and correct any errors promptly. A good credit history assures lenders about your repayment capacity, leading to smoother loan terms.
Keep your job history consistent
Leading banks and financial institutions prefer borrowers with stable incomes. Your overall work experience and the duration at your current job matter. Typically, having two to four years of work experience, including at least one year in your present role, strengthens your job application.
That is why individuals working in government jobs, PSUs, stable private jobs, etc., are often offered lower interest rates and more flexible repayment conditions.
Take time to compare loan offers carefully
You should never rush into accepting the first loan offer. Instant decisions and erratic moves can hurt your long-term financial health. Set aside time to compare offers from different banks and financial institutions.
Visit the official websites of major lenders to explore their interest rate offers. Reach out to their customer service team for clarity. Do not forget to check for festive deals, which may come with reduced interest rates and lower processing fees.
Avoid common mistakes and pitfalls
Most borrowers focus only on interest rates and ignore factors such as processing fees, hidden charges, prepayment penalties or late or delayed payment fines.
Make sure you consider these often-overlooked yet critical aspects. Maintain a healthy debt-to-income ratio to keep your EMIs manageable. Only opt for a loan if absolutely necessary. It is wise to avoid unnecessary borrowing to stay safe from debt and traps and repayment stress.
Maintain liquidity in your bank account
One modern banking metric lenders review is your average monthly balance (AMB). A healthy AMB shows that you manage your finances well and have strong repayment potential.
Consistent savings, steady cash flow and effective bank account management all signal financial stability, making you a low-risk borrower.
Choose shorter, easier loan tenures
To secure lower interest rates with your personal loan, you should opt for a shorter repayment period. Given EMIs might be a little higher, still financial institutions and lenders often reward shorter loan tenures with easier repayment terms and conditions. This way, you will end up repaying less interest on an overall account.
Hence, maintaining a reputable credit score, i.e., anything above 750+, is a clear sign of financial stability and calmness. Further, comprehensive financial analysis, comparing lenders sensibly, and following the additional steps discussed above can improve your eligibility for a low-interest rate personal loan in India.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
