When we talk about applying for personal loans, we always think to get them at a low-interest rate. You can take a personal loan and use its funds to fulfill your various financial requirements. A personal loan is also called an unsecured loan because you don't have to provide collateral. Thus, you have to repay the loan in Equated Monthly Instalments just like other loans.
However, the question arises how to get low at a low interest rate? To clarify your doubts, we will talk about the various tips that can help you get a personal loan at a low interest rate. Read below to know about it in detail.
What Are The Uses of Personal Loans?
A personal loan is really helpful in getting appropriate funds for any emergency. Also, you can pay off the loan by paying an EMI for a fixed tenure that can vary from 6 months to 1 or 2 years. Thus, these are the following uses of personal loans.
- Moving and Shipping Costs
- Medical Emergency
- Costs for vacations and trips
- Consolidation of Debts
- Costs for Education
- Home Renovation
- Occasions such as Wedding, and others
Hence, as you know how to use the personal loan for the above purposes, you can decide the loan amount. As a result, you will get an idea of what should be an ideal interest rate for your personal loan.
Tips To Avail A Low Interest Rate For Personal Loan
You can follow the below tips to get a personal loan with a low interest rate.
Credit Score Helps A Lot
When you apply for a personal loan at a bank, they will always check your credit score. Hence, it becomes easier to avail of a personal loan if you have a higher credit score. A credit score gives a clear idea to the online lenders and banks about your repayment habits, income, and other factors.
Therefore, if you want to increase your credit score, you must pay the EMIs on time. Along with that, you must not take several loans at a time. Thus, it will be difficult to avail of loans from any financial institution if you have a low credit score.
Have A Stable Flow of Income
Secondly, a stable flow of income also plays a crucial role. And if you prove it to the bank, then it becomes easier to get low interest rates for your personal loan. So, if you are employed with a reputed firm, then there are chances that you will get a loan with a lower interest rate.
Apart from that, if you have a government job, then the bank will easily provide you with a loan with a lower interest rate. However, you should have a minimum experience of at least 1 year to be eligible for a personal loan. Also, you must work with your current employer for at least 6 months.
Compare Different Lenders Before Applying
Thirdly, the best way to get a loan at a lower interest rate is to compare different lenders before applying. The information about personal loans from online lenders and the bank is available on the internet. Thus, it will be best to use this opportunity to apply for personal loan.
By comparing, you will get to know which bank is offering the low interest rate for personal loans. Another benefit of this feature is that you can also apply it online. Thus, search for different banks and check their interest rate for a personal loan.
Know the Method For Interest Calculation
To get the low interest rate for your personal loan, you should know the calculation method. Because even if you pay low interest, you will be paying the higher amount as EMI. For that, you need to know that you are availing of the flat-rate method or diminishing interest.
Paying diminishing interest requires paying for the interest applicable to the outstanding amount. On the other hand, a flat rate means, that the interest rate will remain the same throughout the loan tenure. Thus, you have to choose accordingly the type of interest calculation for your loan.
Choose a Lender Known to You
Additionally, it is best to find out those lenders who are known to you. It is basically because having a mutual trust between you and your lender is a plus point. Apart from that, if you also have a strong relationship with your bank, then you can go for it too.
So, if you are an old customer of a bank, then, you will definitely get a low interest rate. Also, if you have a good reputation in your field, then this can also be a major advantage to get avail of low interest rate.
Don’t Miss the Seasonal Offers
There are several incidents that we get seasonal offers by banks and loan providers for a personal loan. They offer loans with exciting interest rates that can match your financial needs. Generally, these schemes are launched during festive seasons across the year.
Therefore, if you take a personal loan during those times, then you can easily avail of a low interest rate. However, you must check that if these offers are really genuine or just a marketing strategy.
Close Your Past Debts
Lastly, it would be great if you close your past debts before applying for a new one. The bank will check that if you are already paying for other debts or not. Thus, even if you have any, then there are chances that the interest rate will increase.
So, if you want to avoid this issue, you should clear all the debts that you took in the past. So, you must have a good repayment record of your previous loan.
These are the above information regarding how you can get a personal loan with low interest rate. Hence, the above tips will help you to get a personal loan without much hassle.