Three ways to get a better personal loan rate
Lenders consider multiple factors, including the loan applicant’s credit score, monthly income, job profile and employer’s profile, before they sanction a personal loan. Increasing the adoption of risk-based pricing has further led lenders to consider these factors while setting personal loan interest rates.
Following these tips can help you avail of a personal loan at a lower rate.
Maintain a good credit score: Those having a credit score of 750 and above have higher chances of loan approval. Such consumers are considered more financially disciplined and hence carry lower credit risk for lenders. Lenders may also offer preferential interest rates to loan applicants having a higher credit score.
Gaurav Aggarwal, senior director, Paisabazaar.com, said, “Follow healthy credit practices such as repaying your EMIs and credit card bills by due date, restricting credit utilization ratio within 30%, monitoring loan accounts guaranteed or co-signed by you, avoiding multiple loans or credit card applications within a short span and maintaining a healthy credit mix to build and maintain a strong credit score.”
Aggarwal added, “Develop the habit of reviewing your credit report at regular intervals, ideally at least once in every three months. Doing so will allow you sufficient time to take corrective efforts, if required, to improve your credit score. This process will also allow you to identify and rectify incorrect information or clerical errors. A rectified credit report will automatically increase your credit score.”
You can fetch one free credit report every year from each credit bureau. Alternatively, you can also get free credit reports from online financial marketplaces.
Maintain a good banking relationship: When going for a personal loan, you must enquire with banks and non-banking financial companies (NBFCs) with whom you have existing customer relationships.
Among the numerous lenders offering personal loans, many tend to provide personal loans at preferential interest rates to existing customers. Such banking relationships can be in varying forms such as current, savings, salary or fixed/recurring deposit accounts or existing loans or credit cards.
Hence, those looking to avail personal loan should start their search by first contacting the bank and NBFC with whom they share existing banking and lending relationship. Interest rates and other loan features offered by them can then be used as a benchmark to compare other lenders’ personal loan interest rates.
