Personal loans are one of the most viable financial options for individuals facing unexpected financial problems in daily life. A personal loan can be used to meet unplanned expenses including the cost of the wedding, holiday expenses, festive purchase, child’s wedding expenses, home renovation expenses, medical bills and credit card consolidation.
Several lenders are providing a personal loan online with some useful tools like personal loan calculators – EMI calculator and eligibility calculator.
What are the lowest interest rates
Interest rates charged by banks vary slightly. The lowest interest for personal loans typically starts from 10.50% per annum and goes up to 30% p.a. NBFCs (Non-Banking Financial Companies) generally charge higher interest as compared with banks. To be eligible to get the lowest interest for personal loans, borrowers need to completely satisfy the eligibility requirements set by the lender. Top banks provide personal loan eligibility calculator on their websites, such as ICICI personal loan eligibility calculator, HDFC Bank eligibility calculator, etc.
Interest is one of the most significant components of the overall cost of a personal loan. It also impacts the monthly instatements of a personal loan; lower interest means lower EMI, and higher interest increases the EMI.
Use a personal loan calculator to know your EMI and interest. For example, you can use ICICI personal loan EMI calculator to find out your monthly payment.
Secrets to getting a personal loan at lowest interest
Here are some important tips to get the cheapest personal loan:
Improve your credit score
A personal loan is an unsecured loan which means lenders don’t ask loan applicants to submit any assets as collateral, hence the risk involved for the lender is higher. Therefore, the credit history of a borrower plays a very important role in determining his/ her personal loan eligibility. Individuals with a proven track record of repayment are considered as creditworthy and trustworthy borrowers. Higher credit score will help borrowers to get a personal loan at lower interest.
However, if your credit score is low, you can take the following steps to improve it:
- Pay off all your credit card/ loan dues on time
- Request for your credit report from credit bureaus and get errors removed from it, if any
- Don’t use more than 30% of credit limit; you will come across as a disciplined and informed borrower
Shop around for rates
Every lender has its own eligibility criteria and decides the interest rate accordingly. Some lenders charge higher interest than others. You should not immediately apply with a lender that you see first. Go through the interest rates and other charges levied by multiple lenders. Compare rates charged by all of them to find the lowest interest.
It is advisable to keep in mind that the rate of interest is not the overall cost of a loan. Charges like processing charges, prepayment charge, late payment penalty, interest rate type – fixed or flexible – etc. should be considered when applying for the loan.
Consider personal loan APRs – not just base rate
APR or annual percentage rates refers to the overall fees charged on a personal loan each year. While searching for personal loans, you should compare APRs from multiple lenders rather than just base rate. Prepayment, foreclosure and late payment charges are not included in the APR. Hence, while applying for a personal loan, you should find out prepayment charges on the personal loan you are applying for.
Apply for a loan from a lender you bank with
You can try with a bank where you have a salary account or current account. If you share a good relationship with the bank, the bank may agree to offer you the lowest interest for a personal loan. As the bank already has your personal and financial records, your application may get approved with minimal documentation.
Apply for shorter term personal loans
Shorter term means less interest. If you think a long tenure is costing you much amount in the form of interest, you should apply for the loan for a shorter period. Select a short term that allows you to borrow the sufficient amount and won’t put a strain on your pocket in the form of EMI.
To arrive at the most suitable tenure you can use a personal loan EMI calculator, such as ICICI personal loan EMI calculator. Personal loan calculators help users to figure out their EMI for chosen tenure proactively.
Use soft searching instead
When you search for a personal loan, refrain from applying for the loan with multiple lenders at once. Multiple personal loan applications can hurt your credit score even if you have been maintaining a good credit score for years. Instead, you should use online tools to check your eligibility.
You can use ICICI personal loan eligibility calculator to know whether you qualify for ICICI Bank personal loan. Online tools use minimum information to evaluate eligibility and generally this type of search is outside lender’s knowledge. You can alternatively use online marketplace for a personal loan to know your eligibility and compare rates from multiple lenders.
Add a co-applicant
If you think your income or credit score is not sufficient to get a personal loan at low interest rates, you can add a co-applicant with a good credit score and higher income to apply for a personal loan. The lender will consider the income and credit score of the co-applicant. Some lenders charge lower interest rates to woman borrowers. You can make your spouse the principal applicant.
Look for seasonal offers
Usually, banks and NBFCs roll out offers through SMS and email during the festival. You can apply for a personal loan whenever you get a good offer on a personal loan from a bank. For example, ICICI Bank, HDFC Bank, State Bank of India are giving lucrative deals on term loans this festive season.
Apply for secured personal loan
This is the last resort! While a personal loan is an unsecured loan, you can pledge any assets as collateral to get a personal loan at lower interest. The asset acts as a guarantee against the loan, which means if you fail to repay the loan, the lender can auction the assets to recover the loan amount. Multiple lenders charge lower interest when the loan is secured by an asset. Assets like land, gold, fixed deposits, etc. can be used to get a personal loan.
Conclusion
With too many lenders offering a personal loan, it is advisable to compare rates and terms applied by all of them. Getting the cheapest loans is not difficult with due diligence. Now it is not necessary to apply for a personal loan with traditional lenders. You can use lending apps like Dhani, PaySense, MoneyView, CASHe, etc. to get small-ticket personal loan in a couple of minutes.
Instant loan apps charge interest on a monthly basis and loan terms for these loans are shorter. Hence, you can close the loan in a couple of months, which as a result will cost much less as compared to conventional loans. No matter where you get a personal loan from, don’t forget to use personal loan calculators, including EMI calculator and eligibility calculator.
