Lenders consider several factors, including a loan seeker’s credit rating, monthly income, job profile, and employer profile, before approving a personal loan. The increasing adoption of risk-based pricing has further led lenders to consider these factors when setting the interest rates for personal loans.
Following these tips can help you qualify for a lower rate personal loan.
Maintain a good credit rating: Those with a credit score of 750 and above are more likely to get loan approval. These consumers are seen as more financially disciplined and therefore present a lower credit risk to lenders. Lenders can also offer preferential interest rates to loan applicants with higher credit scores.
Gaurav Aggarwal, Senior Director of Paisabazaar.com, said: “Follow sound credit practices such as paying off your IMEs and credit card bills when they are due, limiting the rate of credit usage. at 30%, by monitoring loan accounts guaranteed or co-signed by you, avoiding multiple loans or credit card applications in a short period of time, and maintaining a healthy credit mix to establish and maintain a strong credit score. credit. “
Aggarwal added, “Develop the habit of reviewing your credit report at regular intervals, ideally at least once every three months. This will give you plenty of time to take corrective action, if necessary, to improve your credit score. This process will also allow you to identify and rectify incorrect information or clerical errors. A corrected credit report will automatically increase your credit score. “
You can get a free credit report every year from every credit bureau. Alternatively, you can also get free credit reports from online financial marketplaces.
Maintain a good banking relationship: When opting for a personal loan, you should check with banks and non-bank financial corporations (NBFCs) with which you already have customer relationships.
Among the many lenders offering personal loans, many tend to offer personal loans at preferential interest rates to existing customers. These banking relationships can take various forms such as fixed / recurring current, savings, salary or deposit accounts or existing loans or credit cards.
Therefore, those seeking a personal loan should begin their research by first contacting the bank and NBFC with whom they share existing banking and loan relationships. The interest rates and other loan features they offer can then be used as a benchmark to compare the interest rates for personal loans from other lenders.
Comparison of interest rates: In today’s digitized world, comparing interest rates between different loan offers from different banks and NBFC has become easy. Therefore, you should do proper research work before submitting the application form.
Aggarwal said, “With dozens of banks and NBFCs offering personal loans, their interest rates can vary widely, ranging from 10% to 24% per year. Since the credit assessment process and lenders’ risk appetite may also vary, the chances of a personal loan being approved and the interest rate applied would also differ from lender to lender. . Therefore, those who are considering using personal loans should compare the offers of as many lenders as possible before focusing on a particular lender. “
However, when comparing different personal loan offers, don’t just compare the interest rate. You should also evaluate the other characteristics of the loan, such as processing fees, loan amount, repayment term, and prepayment charges, before finalizing a particular lender.
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