Personal loans offer crucial support for various financial needs. You can use this borrowing option to merge multiple debts into a single debt, fund a big-ticket purchase, cover wedding expenses, travel the world, and even manage emergencies hassle-free. However, the interest rate on personal loans is a critical factor that determines the overall cost of borrowing.
The lower the rate on a personal loan, the more savings you enjoy, along with manageable Equated Monthly Instalments (EMIs) and a stress-free experience. For example, suppose you need a ₹5 lakh loan. One bank offers it at a 10.49% interest rate, while another offers the same amount at 12%. Over a four-year term, choosing the first option could save you roughly ₹17,000 in interest.
To benefit from these significant savings, let's explore practical steps you can follow to secure a personal loan at a low interest rate.
Choose the right bank
Consider the IndusInd Bank Instant Personal Loan, which offers a competitive interest rate to keep your entire borrowing journey affordable. It does not matter if you want to avail a personal loan in Chennai, Bangalore, or Mumbai, the entire application process is seamless, fast, and 100% digital. You benefit from a hassle-free experience from start to finish.
Look at the additional benefits you get with this instant personal loan:
| Quick disbursal | After applying and completing verification, get the loan amount in your bank account almost instantly. |
| Flexible tenure | Repay at your convenience at a tenure ranging from one to four years. |
| High loan amount | Borrow any amount from ₹30,000 to ₹5 lakhs and handle both small and large expenses effortlessly. |
| No physical documentation | The entire process is paperless, which saves you time and effort associated with loan paperwork. |
| No hidden charges | Transparent fee structure means clear payment terms and no unexpected costs. |
Apply for an instant personal loan today and get started with IndusInd Bank!
Improve your credit score
Since a personal loan is unsecured and requires no collateral, banks rely on the borrower's credit score to determine the interest rate, loan amount, and repayment terms. A poor credit score makes you a high-risk borrower, which can lead to loan rejections, smaller approved loan amounts, or higher interest rates. So, improve your credit score before applying for a personal loan. Here are the steps you can take:
● Pay bills/EMIs on time: Always pay your bills by the due date to avoid late fees and keep your credit score in good standing. Set up automatic payments to never miss or delay a payment.
● Limit new credit applications: Each time you apply for a credit card or loan, the issuing bank makes a hard inquiry on your credit report, which can slightly lower your score. So, try not to make multiple loan applications within a brief span of time.
● Don’t max out your credit limit: The credit utilisation ratio shows your dependency on credit money. It is wise to keep your credit utilisation ratio below 30% to enhance your creditworthiness.
● Check your credit report regularly: Review your credit report regularly to spot any anomalies or inconsistencies that could be affecting your score. Dispute any errors with the credit bureau promptly.
Choose a loan tenure wisely
The loan tenure, or repayment period, directly affects both your monthly instalment amount and the total interest you will pay over the loan’s life. A longer tenure might lower your monthly instalments, but it will increase the total interest you have to pay. A shorter tenure could mean higher monthly payments, but less interest paid overall.
Before deciding, consider your monthly budget and financial stability. If you can afford higher payments, opting for a shorter duration can save you money in the long term. However, if your budget is tight, a longer tenure with lower monthly payments might be more convenient, even if it costs more in terms of interest.
The key is to choose a loan term that balances manageable EMIs with low interest costs.
Think about getting a creditworthy cosigner
If your credit history or income doesn't independently qualify you for the best rates, consider adding a cosigner or co-borrower with a strong credit score and stable income.
Wondering how this move can strengthen your personal loan application? The additional borrower shares equal responsibility for the loan. Here, banks get more assurance because of the two incomes, two credit scores, and a combined commitment to repayment. This reduces their risk and could mean a lower interest rate for you. Moreover, bringing in a cosigner can speed up the approval process and provide quicker access to funds as well.
Take advantage of periodic offers
Many banks offer attractive rates and discounts during festive seasons, special campaigns, and year-end sales. If your need isn’t urgent, plan your borrowing around these times to benefit from reduced rates and make your loan more manageable.
Remember, offers can differ based on your location. For example, if you are considering personal loan finance in Chennai or Mumbai, you might notice different offers from banks in each city. Hence, use bank websites or mobile banking apps to stay updated on specific personal loan deals in your area.
Only apply for the amount you need
It can be tempting to borrow more than what you need, especially since you can apply for personal loans online and avail them without collateral. However, if your loan amount exceeds your repayment capacity, the bank could either reject your loan application or propose a higher interest rate because of the increased risk. Therefore, borrow an amount that your current income and financial obligations can comfortably support.
Important note: Besides the principal amount and interest, you will need to account for processing fees, GST, and other charges when calculating the total cost of a personal loan.
To sum up
Getting personal loans at low interest rates is important for any borrower. After all, lower rates simplify repayments, reduce the total cost of borrowing, and allow the loan to be paid off faster because of lower interest accrual. All you have to do is to be strategic and disciplined in your borrowing decisions.
Therefore, follow strategies like maintaining a good credit score, borrowing only the amount you need, checking seasonal offers, and considering a cosigner if necessary. Most importantly, choose the right bank that offers competitive interest rates and easy repayment terms to keep your borrowing experience both affordable and stress-free.
