Be it buying a gadget online, getting the best airline deal or holiday package, there are always tips and tricks to get the best deals. We have some tips laid out for personal loans too.
Just tweaking your personal loan application or following some basic tips, can get you lower interest rate for your loans.
Personal loans generally come at a high interest rate. So, here are some tips that you can use to get better interest rates for your personal loan.
1: Make use of seasonal offers
With increasing competition, and a decline in the growth of corporate rates, banks are offering personal loans at lucrative interest rates to compensate for the numbers.
Usually banks announce such schemes during a festive season for a limited time period. It is, therefore, a good idea to apply for a personal loan under any such festive scheme or seasonal offer.
Additional Reading: Personal Loan Rate of Interest
2: Use your credit score as a bargain tool
Your credit score is the yardstick for banks to see your previous financial track record. If a bad credit score can cancel your loan, why not use the good credit score to get a better deal?
You can use your high credit score to bargain with the bank for a better interest rate. After all, with a high credit score you are potentially a safer bet for the bank as compared to someone with a lower score.
Various banks have their own credit score yardstick for loan approval. On an average, a credit score of 700 plus is considered as safe by banks. To get the best interest rate and to use your credit score as a bargaining tool, ensure that your credit score is anywhere between 750 to 900 range.
Additional read: How to trade your CIBIL score for an Aston Martin?
3: A good track record for repayment can be helpful
A small mistake, like a bounced cheque can bring down a good credit score.
Thankfully, as credit score is just one of the yardsticks used by banks to assess their risk. If you have good, long term track record for repayment on any other loans with the same bank, you can still bargain for discounted interest rate despite a lower credit score.
Additional read: 4 Pointers you need for your personal loan
4: Opt for Banks instead of NBFCs
Give preference to banks as they are more likely to offer you a discounted rate as compared to any NBFC. Don’t just concentrate on an offer of a higher loan amount or a quicker disbursal, as banks disburse loans just as quickly as any NBFC.
Both banks and NBFCs offer loans at competitive rates, but when comparing on a whole, banks have better deals on personal loans. Especially if you have a salary account or an FD with them.
Additional Reading: Personal Loan Eligibility
5: Check the interest calculation method
Do not get carried away by the offer of a lower interest rate before understanding the full details. Some NBFCs may offer you a low interest rate which may sound too good to be true. The catch is that such lower interest rates are flat rates, and do not consider gradual repayment of principal and interest amount.
A flat rate would cost you more than a diminishing interest. With a diminishing rate loan, you pay interest only on the outstanding balance, whereas, with a flat rate, you pay interest for the initial loan amount till the end of the entire tenure.
Additonal read: How interest is calculated on Personal Loans
Personal loans usually come with a high interest rate, but, by using the above tips, you can get personal loans at better rates. Of course, they come with must follow rules for personal loans.
Make sure your interest rate is working for you.