In today’s times, when the costs of living have sky-rocketed, you never know when you might face an urgent need for cash. At such times, rather than asking for financial assistance from friends & family and losing face in front of them, it is much more efficient to opt for personal loans via new-age banks and NBFCs (Non-Banking Financial Companies). Further, the personal loan interest rates charged by the new-age financial institutions are way lower when compared with the rate of interest charged by traditional financiers.
Further, there are several other benefits of opting for a personal loan, such as:
a. The flexibility of usage: One of the biggest benefits of opting for a personal loan is that you can make use of the monetary amount for any of your personal or business use. You can use the personal loan amount to fund your travel plans, pay off medical bills, purchase raw materials and machinery for business, debt consolidation, business expansion, home renovation, etc.
b. Low-interest personal loans: There are a ton of banks and NBFCs (Non-Banking Financial Companies) that offer personal loans; thus, it becomes extremely easy to negotiate and find a financial institution that provides low-interest personal loans. You can easily compare personal loan interest rates by making use of online tools such as an EMI calculator provided on financial institutions’ websites. This EMI calculator helps you find the best personal loan product by calculating your instalments based on your repayment tenure, principal amount, and interest rates.
c. Zero-collateral: Another perk of opting for an instant loan in India is that most of the banks and NBFCs (Non-Banking Financial Companies) provide you financial assistance without asking for any collateral. Thus, you can procure the loan amount without keeping any sort of security with the financial institutions.
d. Paperless documentation and quick processing: Further, gone are the days when you would have to carry loads of documents and visit several financial institutions; after all, there are a plethora of banks and NBFCs (Non-Banking Financial Companies) that have started providing paperless documentation. Thus, you can easily submit the required documents online, and get the loan sanctioned and processed within a few working days.
Therefore, applying for a personal loan online has several benefits attached to them. However, the financial institutions charge you a certain amount in the form of interest rates and processing fees, prepayment charges, and late payment fees. However, you can easily reduce these costs by properly understanding the various factors that determine our personal loan interest rate in India.
1. Credit history
Your credit history is one of the most important things that determine your personal loan interest rates. After all, the biggest problem for every financial institution when sanctioning the loan amount is to access whether the borrower will repay the loan amount in time. Thus, having a good credit history helps the banks and NBFCs (Non-Banking Financial Companies) scrutinize your financial behaviour and provide you with low-interest personal loans. You can easily improve and build your credit profile by timely repaying your existing EMIs and credit card bills. Further, if you don’t have a first-time borrower and don’t have a previous credit history, then you must first build your credit profile before applying for a personal loan online. After all, if you don’t have a credit profile then the financial institutions might charge you with higher interest rates. You can easily build your credit history by opting for lower amounts and higher tenure personal loans.
2. Credit score
A credit score is a 3-digit numerical figure given by credit rating agencies in India. This 3-digit figure is a reflection of your financial management skills, repayment history, credit history, etc. CIBIL is one of the biggest credit rating agencies that provides credit scores in India. The CIBIL score range in India is between 300 and 900; further, the higher your credit score, the lower the interest rates charged by financial institutions. You can easily check your credit score online by visiting financial institutions’ websites as well as aggregator sites.
3. Opt for a lower tenure
Although, opting for a flexible repayment tenure is one of the biggest perks of opting for a personal loan online in India; however, it is also one of the major factors that determine your personal loan interest rates. You must always remember that; the longer your repayment tenure, the higher the interest rates charged by financial institutions. However, this doesn’t mean that you must opt for an extremely lower interest rate and risk being unable to pay the higher instalment amount. To properly calculate your repayment tenure, ensure that you make use of an EMI calculator. An EMI calculator is an online tool available on a financial institution’s website that provides you with the perfect repayment tenure based on your interest rates and principal amount.
4. Choose a lower principal amount
You must never apply for a higher principal amount just because you are qualifying for a personal loan. After all, sooner or later, you would not only have to repay the borrowed principal amount but also the interest rates levied on the same. Thus, for low-interest personal loans, the first thing that you must do is to properly plan out your finances in advance. After all, the lower your principal amount, the lower the interest rates that you would have to pay to the financial institutions.
5. Source of income
Your source of income is yet another factor that determines your personal loan interest rates in India. After all, having a good source of income helps the financial institutions to be sure of the fact that you will be timely able to repay the loan amount. Also, if you are working with a notable organization and have a good source of income, you can easily negotiate with the financial institutions to get a low-interest personal loan. Other than that, showing an additional source of income will also help you reduce your personal loan interest rates in India.