Non-banking financial companies in India continue to enjoy a strong relationship with consumers, as far as personal loans are concerned. Presently, their share in active loans stands at 87%. Amid financial crises, personal loans emerge as a viable financial solution to cover diverse expenses like medical emergencies, debt consolidation, higher education, etc.
However, availing of the fund makes sense only when the cost of borrowing is affordable with current personal loan interest rates.
- In 2020, the RBI slashed their repo rate by 115 bps, keeping it unchanged to 4% to date.
- Around 76% of borrowers do not know their loan interest rates.
Although the policy rates ensure comparatively low-interest rates on loans, there are certain factors influencing the total cost. If a big-ticket expenditure is in your plans, check out some golden ways to avail of low personal loan interest rates efficiently.
Tips to avail personal loans at low-interest rates
a) Improve your credit score
Credit score is a vital parameter that ensures approval or rejection of a loan application. The 3-digit score indicates an individual’s creditworthiness and reflects his/her past financial behaviour. Improving your credit score to reach above 750 increases your chances of availing of a low interest personal loan. Lenders further consider this rating to finalise loan amounts, repayment schedule and other terms and conditions. Make sure you know how CIBIL score is important for personal lending before you apply for this advance.
- Close to 68% of customers are unaware of their CIBIL score.
- 52%, however, know the meaning and significance of a credit score.
b) Maintain stability in employment history
Your employment longevity at a specific company is one of the factors affecting personal loan interest rates. Frequent job changes indicate instability in earning, which can lead to loan default. You should, hence, be employed at your current company for at least 1 to 2 years at a stretch to improve your chances of borrowing.
In this context, lenders like NBFCs may also verify the credentials of the employer. The less risky profile you hold, the more you are qualified for affordable current personal loan interest rates and favourable terms on a personal loan.
c) Choose tenor for repayment aptly
Selection of an appropriate tenor not only prevents a borrower from piling debts but also makes a difference in EMIs. A longer repayment tenor increases the rate of interest applicable. It increases the total interest outflow but keeps the EMIs manageable. A shorter tenor, contrarily, not only attracts a lower interest rate but also reduces total interest outflow. However, you pay a higher EMI every month.
Strategize so that you manage the personal loan repayment efficiently.
Using an EMI calculator for personal loan can make such evaluations hassle-free. You need to provide your preferred loan amount, the applicable rate of interest and a suitable tenor to know the monthly instalments (EMIs), total payable interest and total cost of borrowing.
Let’s consider a personal loan amount of Rs.10 lakh at a 12% rate of interest.
- With a tenor of 48 months, the payable interest upon maturity is Rs.2,64,024. The EMI you have to pay is Rs.26,334, and the total payment is Rs.12,64,024.
- Increase the repayment tenor to 60 months, and the payable interest goes to Rs.3,34,677. Here, EMIs come down to Rs.22,244 while the total cost of loan shoots up to Rs.13,34,677.
With the help of this calculator, you can make multiple entries until a comfortable combination arrives. Besides, you can also approach a lending institution you have already had past transactions with. Chances of negotiation are better as your financial profile is known to them.
Leading NBFCs in the country like Bajaj Finserv additionally bring pre-approved offers customised for existing clients. Pre-approved offers are available on a variety of financial products like personal loans, business loans, credit cards and more. Such offers make the process of availing credits simplified and less time-consuming. To check your pre-approved offer, you need to provide a few details only.
The nation’s economy is appearing to recover in FY2021, as credit growth shows an upward trajectory. The ways mentioned above may appear simple initially, but they can help you grab attractive current personal loan interest rates. Approach reputed NBFCs offering up to Rs.25 lakh with exclusive features to optimise your borrowing experience.