Personal loans are easy to obtain since they are unsecured loans with no collateral requirements. Personal loans, on the other hand, have considerably higher interest rates than secured loans, such as house loans, gold loans, and so on, because there are no underlying securities. The most often advised recommendation for obtaining a personal loan at a reduced interest rate is to keep one’s credit score good, i.e., above 700 or 750.
To obtain any interest rate reduction, you must keep your credit score in good standing.
A strong credit score might help you get the repayment period you want. A good EMI payback history also aids customers in negotiating a lower rate of interest on a personal loan.
According to Pranjal Kamra, CEO of Finology, the following steps should be taken to obtain personal loans at the lowest interest rates:
1. Keep a decent credit score: Your credit score represents your capacity to repay a debt on time. The higher your credit score, the easier it will be for you to obtain a loan. Lenders determine the interest rate, loan amount, and other loan parameters, thus to obtain a personal loan at the lowest feasible interest rate, one must maintain a high credit score.
2. Make an application for a secured loan: Non-collateral loans have a higher interest rate because there is no security, thus one must apply for a collateralized loan.
3. Instead of NBFCs, apply through a bank: The interest rate charged by NBFCs or private lenders is greater, and the amount disbursed is modest. As a result, to benefit from a cheaper interest rate, one must apply to a bank.
4. Examine the interest rates for various loan terms: Lenders provide varying interest rates for various terms. For example, the interest rate will be greater if the loan is for a longer time.
5. One should also avoid submitting numerous loan applications: Too many loan applications with multiple lenders can reduce your credit score, reducing your chances of receiving a personal loan with a lower interest rate. For the topics listed above, try to keep your CIBIL score over 700.
Although personal loans are simpler to obtain, obtaining one in haste may trap you.
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