4 Tips to Get the Best Personal Loan Interest Rates
5 min read | 3 months ago
Personal loans are versatile financial tools, often used to fund major expenses that might be difficult to cover upfront. Imagine you need to make necessary home repairs or handle unforeseen medical bills. Maybe you’re planning a significant life event, like a wedding or a cross-country move. Each of these scenarios can put a strain on your finances and a personal loan can offer the funds you need.
With that in mind, securing the best possible interest rate is essential to making a personal loan work for you. Let’s explore tips and strategies that can help you lock in a favourable rate and keep your costs down. But before we dive into how to get the best personal loan interest rates, let’s understand what they are.
What is personal loan interest rate?
A personal loan interest rate is the cost you pay to borrow money from a bank or financial institution. In India, it generally starts from around 10% to 12% p.a., depending on factors like your credit score, income level and lender’s assessment of creditworthiness. Typically, personal loans are unsecured, meaning you do not need collateral, which is why rates might be higher than secured loans like home loans.
These rates can be either fixed or floating. A fixed interest rate remains the same throughout the loan term, offering predictable payments. Meanwhile, a floating rate might change based on market conditions, potentially affecting your monthly repayments.
How can you get the best personal loan interest rate?
Here are some ways in which you can get the best personal loan interest rate:
1.Aim for a higher credit score
Lenders often reserve the lowest rates for those with credit scores of 750 or higher, as a high score demonstrates strong creditworthiness and low risk.
How to improve: Review your credit report for any inaccuracies that might be pulling your score down. Prioritise paying off debts and keep credit utilisation under 30%. Over time, these actions can increase your score, making you eligible for better rates.
2.Compare loan offers
Interest rates can vary significantly between lenders, so comparing offers can help you identify the lowest rates and most favourable terms.
How to implement: Use online loan comparison tools to view different offers. Focus on the APR (Annual Percentage Rate), which combines interest and fees for a clearer picture of total costs. Speaking to lenders directly can also help, as some may be willing to match or beat competitor rates, providing better overall terms.
3.Choose between flat and reducing interest rates
Flat rates charge interest on the original principal for the loan term, while reducing rates only charge interest on the remaining balance, which can lead to savings.
How to decide: For longer loan terms, reducing rates are generally more cost-effective, as interest decreases as you repay the principal. Ask your lender for both options to compare the total interest you’d pay over the loan term.
4.Monitor seasonal offers and pre-approved loans
Festive seasons or promotional periods often bring lower rates, especially for pre-approved customers or those with strong banking relationships.
How to leverage: Keep an eye on offers from lenders you already bank with, as they may provide better rates for existing customers. If you’re pre-approved for a loan, it could mean faster processing and a lower rate, so consider these options as they arise.
Get the best personal loan interest rate at Unity Small Finance Bank
Securing the best personal loan interest rate can make all the difference in your financial journey. Unity Small Finance Bank offers competitive rates, making it easier to manage repayments and save on costs. So, explore your options today to find a rate that fits your needs. Fill out the application form online and see how we can help you get the most out of your personal loan.
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.
