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Low Interest Rate Loans Research Team | Posted On Monday, December 24,2018, 03:08 PM

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Low Interest Rate Loans



What is a Personal Loan?

A personal loan is usually taken to meet short term needs. Generally, the purpose of this loan is to pay off credit card debts, family vacation, and wedding expenses or to meet a medical emergency. A Personal Loan is availed by individuals on the basis of specific criteria, like level of income, employment history, credit score, and scope for repayment.

Personal loan can be availed from a banking institution or a non-banking financial company (NBFC). Borrowers can apply online for personal loans and can also use online tools like the Personal Loan EMI Calculator, to assess the monthly installments, EMIs, throughout the tenure before applying for a personal loan.

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How to compare personal loan interest rates?

Before applying for a personal loan, make sure to compare the rates of interest offered by various banks, NBFCs and loan aggregators. Different banks offer personal loans at different rates of interest. Compare the various personal loan products and their rates of interest. Use the online EMI calculator to get a clearer picture of the monthly installments. The EMI calculator helps ensure that the monthly installments fit your budget.

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Low Interest Rate Loans

How lenders set interest rates?

Lenders offer borrowers a range of fixed and variable rates on a personal loan. The lenders often use a method called risk-based pricing to determine the interest rate and terms of the loan. The risk-based pricing method tries to determine how much risk the borrower poses to the lender, based on your credit scores and other factors. Lenders may use this method along with other information to determine the borrower’s APR.

In case the applicant’s credit history suggests a lower credit risk, then it is likely that the personal loan offered will probably have a lower APR. If the application and credit history of the applicant suggests a higher credit risk, then the lender is likely to offer a higher APR on the personal loan.

In addition to the credit scores, lenders may also take into account the applicant’s credit history, credit reports, annual income, employment status, other debt and the loan amount while determining the rates of interest.

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Which lenders offer low interest rates?

As personal loans are unsecured loans, they do not come at lower interest rates. An unsecured loan is a type of financial borrowing, where the borrowers do not need to keep an asset as security against the money borrowed. Sometimes, banks or lending institutions might offer a personal loan at a lower rate of interest against a security or due to high credit score of an individual.

Online loan aggregators may provide personal loans at a lower rate of interest than traditional banks. However, it is advisable to compare the personal loans online as different lenders have different risk tolerance and underwriting criteria. 

How to find personal loan with low interest rate:

As per the current rates, Yes Bank offers the lowest interest rate of 10.75% on personal loans. However, to get best deal on personal loans, you can go through online loan websites as well. The rate of interest on personal loans also depends on factors like the company you are working with, loan amount you have applied for and your repayment capacity. Higher the loan amount, lower will be the rate of interest.

Most banks and lending institutions in India offer personal loans. In case you are looking for an instant personal loan within 1-2 days, you can apply for instant personal loan online. The interest rates of these banks and online loan aggregators are in the range of 10.99% to 16% a year. You can get instant personal loan approval online and check eligibility without having to submit paper documents. Post approval, in case you are an existing account holder in the bank or existing loan customer, then you may be eligible for instant disbursement without any documents.

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Tips for getting the best possible interest rate on a personal loan:

Personal loans are sanctioned based on the repayment capacity and the credit score of the borrower. Given below are a few points that you must follow to avail best possible interest rates on personal loan:

  • Pay your credit card bills and loan installments on time: Practice a healthy credit regime to maintain a healthy credit score and to get a lower interest rate on your personal loan. This includes paying EMIs on time, restricting the number of credit cards, reducing the limit usage on credit cards, resort to taking secured credit wherever possible and regularly checking your credit report to ensure timely course corrections.
  • Avoid applying for multiple loans at one time: Sometimes, customers apply for a loan with multiple banks to improve their chances of getting a loan on time. However, applying for multiple personal loan applications increases the probability of the loan being rejected as each query gets captured in your credit report and multiple queries can adversely impact your CIBIL score.
  • Maintain job stability:  Lenders require that the customer has at least two years of work experience in a particular job. So, avoid switching jobs very often, if you want to get better rates of interest on your personal loan.
  • Make sure you have a good credit score: credit score is an important factor in determining the rates of interest on personal loans. Make sure to maintain a good credit score. Higher the credit score better are your chances of getting a lower interest rate on your personal loan.

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