01 JULY, 2022

A personal loan can be a great way to finance large expenses for education, home refurbishments, cover unexpected expenses and also various emergencies. Interest rates for these loans can be quite high, so it is important to know how you can get the best rate possible. Here are some simple yet best financial practices to follow, which may help you get an affordable interest rate on your personal loan.

  • Improve your credit score

A good credit score shows lenders that you are a reliable borrower who is likely to repay the debt on time, while a low credit score can make it more difficult to get approval and may result in you paying a higher interest rate.

If your credit score is below 750, look for ways to improve it. You have more chances of getting a personal loan at affordable rates if your credit score is over 750. So, make sure you avoid missing loan or credit card repayment.

  • Calculate how much you need to borrow

Make sure you only borrow what you need to get the most affordable personal loan rate. You can use a personal loan eligibility calculator that assesses your income, employment history, existing liabilities, repayment capacity, and credit score to determine if you are eligible for a loan. Generally, the more you borrow, the higher your personal loan interest rate will be.

  • Compare interest rates

Interest rates on personal loans can vary greatly from lender to lender. As a result, it is important to compare rates before you apply for a loan. Fortunately, you can use a personal loan EMI calculator online to compare rates from different lenders.

Simply enter the loan amount, term, and interest rate into the calculator, and it will show your monthly instalments to pay. This way, you can compare personal loan rates from different providers and choose the one that offers the most affordable repayment plan.

  • Use your good relationship with the lender

If you have a good relationship with your lender, you may be able to secure a personal loan at a more competitive rate. This is because many financial institutions offer loyalty discounts to their existing customers.

Moreover, if you have a history of responsible borrowing and repayment with a particular lender, they may be more likely to offer you a lower interest rate on a new loan. Furthermore, you can also negotiate a lower rate by capitalising on your relationship with your existing institution.

  • Use your professional credentials

Applying for a personal loan with professional credentials can help you get more affordable loan rates. Credentials such as your business licence and tax returns can help show lenders that you are a low-risk borrower. This can lead to lower interest rates and fees, saving you money on your personal loan. In addition, having strong professional credentials can help you negotiate better terms with lenders.

To sum up, if you can show your repayment capability, you may have high chances of getting a low-interest personal loan. By following the financial practices mentioned above, you can increase your personal loan eligibility and get the best possible interest rates.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.