The introduction of small personal loans via loan apps is fast revolutionising the borrowing-lending landscape of the Indian financial market. These are mid-ticket loan options packed with alluring features. They are easy to access and can be availed from anywhere. They are unsecured loans which means there is no need to put forth a guarantee or collateral.
Nevertheless, whether it is a small personal loan availed through a loan app or a traditional one, something that remains intact is the need to consider the cost of such financing. Along with the funds, the borrower is also vested with the responsibility of paying the interest and charges. The interest rates levied are, however, dependent on a handful of risk-based factors, whether internal or external to the lender. The ultimate rate levy can thus be impacted by applying a few tips that would help impact these factors.
Here are a few ways in which you can obtain a personal loan with a reasonable rate of interest, whether applying to a loan app or a website.
Tips to Keep a Check on Your Personal Loan Interest Rates
1. Compare market lenders providing the advance
The first and foremost way to determine the minimum threshold for personal loan interest rates in the market is to compare loan offers from available lenders. Keep a lookout for all lending platforms that provide these loans for a better comparison, including lender websites and loan apps.
A thorough comparison of available lenders in the market also provides insight into the possible flexibility in the interest rate that you can expect with lenders. It ultimately helps with improved negotiation regarding the final levy.
2. Choose between the fixed and floating rates of interest
Not many prospective borrowers know of it but the rate levy on personal loans follows two systems of interest calculation.Namely the fixed and floating systems. Choosing between the two can result in remarkable differences in the rate as well as the total interest accrual by the tenure’s end.
A choice between the two rate levy systems should be made based on lending market volatility and the prospects of a rate increase or decrease. Note that either can be beneficial based on the market trends. However, the fixed rate system often leads to interest levy at a notch higher rate. These systems of levy are applicable whether you are availing a personal loan online or offline.
3. Apply with a higher credit score
The credit score indicates a borrower’s creditworthiness. Ideally, lenders look for a higher credit score to approve a personal loan. It is advisable that you check your credit score and work on its improvement. You can improve your credit score by closing your previous loan accounts and repaying your EMIs on time. Also, make sure to borrow only within your repayment budget.
4. Pay off existing dues to revamp your repayment capacity
If you have been servicing multiple small debts, it is advised to repay a few of them to restore your repayment capacity. Borrowing under your repayment capacity allows you to negotiate for lower rates in view of financial stability to service the new EMI. Ideally, the fixed monthly repayment liability of an individual should not be more than 50% of their fixed monthly income when applying for a personal loan online or offline.
5. Keep your credit utilisation ratio under 30%
Your overall credit dependency also contributes to your overall borrowing risk profile. It is thus suggested that you keep your total credit utilisation within 30% of the total available credit on a monthly basis.
6. Leverage your occupational stability to negotiate
Whether applying via a loan app or through a website, your occupational stability bears significant weightage in the lender determining your final interest rate levy. A well-established occupation with income stability stands a better chance of securing a low-interest rate. Typically, individuals employed with public/private companies or MNCs can find it easier to negotiate for better rates than other borrowers.
7. Check out for seasonal or festive offers
Another great way to find reasonable rates on your personal loan is to look out for various festive or seasonal offers that lenders extend. These offers are easily accessible through new-age personal loan apps and can help with attractive rate approval.
While dedicated loan apps keep documentation to a minimal for personal loan approval, providing all documents related to your primary and secondary income sources can be another way to secure low rates. Once you have availed a personal loan, you can always plan for early repayment to cut down on your total personal loan interest accrual and save on the cost of the loan.