How To Get Best Personal Loan Interest Rates

How To Get Best Personal Loan Interest Rates | Unity Bank

Personal

5 min read | 5 months ago

It is easier to fund sudden purchases or meet urgent financial needs today. All you need to do is look for immediate loans online from banks and other financial institutions. However, while getting a personal loan is comparatively more convenient and smoother today, keeping an eye on the interest rate is also crucial. After all, the interest rate influences the total loan cost and your monthly EMI. Here are some tips to get the best rates on personal loans.

Strategies For Obtaining The Best Interest Rate

How do you get the best possible interest rates on immediate loans online? Here are some strategies that might help.

Boost Your Credit Score

Before applying for a personal loan, ensure you have a good credit score. Take your time and improve it by paying off high-interest loans and credit card dues beforehand. Pay your EMIs on time to maintain your credit score without defaults or misses. A credit score of 750 or above will establish your creditworthiness to the lender and increase your chances of loan approval. A good credit score will also open room for negotiations with lenders on the interest rates.

Keep your credit utilization ratio in mind as well. It is taken into account while calculating the score. It denotes your total credit divided by the available amount. It is a crucial indicator of how dependent you are on credit. It is wise to keep this ratio within 30%. Also, avoid applying for multiple personal loans or credit cards simultaneously to avoid hard inquiries that negatively affect your credit score.

Bring Your Salary Account Into Play

If you are a salaried professional, you can use your salary account to get a better deal on your loan. Getting a loan from the bank where you have your salary account may help. The lender will already have access to your details, and you may get the loan faster. Banks are known to offer more favorable terms to their existing customers, including lower interest rates and processing fees.

Compare Interest Rates and Offers

Before finalizing your lender, compare multiple financial institutions, from traditional to small finance banks to NBFCs based on their interest rates and other terms and conditions. Approach lenders with whom you have credit cards, deposits, or salary accounts. Learn about their loan products and special offers for existing customers (if any). You can also compare multiple lenders online. Watch out for special promotions or offers that come with discounts on interest rates or processing fee waivers as well. Several banks may also provide corporate discounts for employees of leading companies. Check whether any such offer is available for your organization before applying.

Do Not Confuse Reducing and Flat Interest Rates

Many borrowers often confuse flat and reducing interest rates. Suppose you get a loan at a lower rate, although you pay higher interest costs throughout the entire loan tenure. To avoid this scenario, understand the interest rate calculation methods of the lender. If you choose a flat interest rate, the rate calculation is based on the principal loan amount for the tenure.

Reducing the interest rate means that the interest payment will be calculated on the principal outstanding amount. Once you start paying EMIs, the principal will come down, and so will your interest costs.

Choosing a reducing interest rate may help you save more in the long run. Do not blindly choose the lowest rate offered to you by any lender. Enquire about the rate calculation method and calculate your total interest cost over the loan tenure.

Tips For Maximizing Savings Through Lower Interest Rates

If you succeed in getting a lower interest rate on your loan, then you should not stop there. Aim at maximizing your savings as much as possible. How can you accomplish this? Make part-prepayments whenever you have any extra funds in hand. It will slash your principal amount considerably and bring down the loan tenure. At the same time, your overall interest outgo will also come down by a significant margin. It will help you save more money in the long run.

Choose lenders who do not have application or origination fees. Opt for banks with low or nil processing fees. It will help you save more on the total cost of the loan.

Conclusion

Follow these strategies while applying for immediate loans online to get the best interest rates. A low and comfortable rate will help you save more money on EMIs, although you should keep an eye on the total interest cost of the loan

FAQs

1. What is the interest rate charged for personal loans?

Lenders have varying rates on personal loans. On average, they may range between 12-38% per annum.

2. Which one to choose-flat or reducing interest rates?

Reducing interest rates may be more beneficial. It is because your principal amount keeps coming down with every EMI payment and it will lower your interest cost too.

About Unity Small Finance Bank

Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.