Astonishing Tips to Avail a Personal Loan at the Lowest Interest Rate This Year
A personal loan allows you to fund your big-ticket expenditures like wedding, education, medical exigencies, or home renovation. To avail the best personal loan offer, you must always compare crucial parameters like personal loan rate, processing fee, administrative fee, repayment tenure etc. amongst different lenders. Note that out of all parameters, personal loan rate is one of the crucial factors. This is because a higher interest rate tends to enhance your overall loan cost while a lower rate decreases the total loan cost by a substantial margin.
Read on to know 3 important tips to avail the lowest personal loan interest rate:
- Build a good credit score
A high credit score of over 750 can assist you to get a personal loan at a low rate. This is because lenders consider you a credible applicant if you hold a higher score. On the contrary, if you hold a lower credit score of below 750, you are looked upon as an individual who holds a high default risk. Thus, lenders might either reject or levy a higher personal loan interest rate to compensate for the higher credit risk.
Given the requirement for personal loan may come up anytime, reviewing your credit score just before placing your personal loan application may be of no help. Thus, ensure to develop a habit of reviewing your credit report periodically. Doing so will help you to take corrective steps to improve or maintain your credit score. Regular review of your credit report will also assist you to detect incorrect info, if any, in your credit report and address them to the lender or concerned credit bureau for instant correction. A rectified credit report enhances your credit score automatically.
- Compare amongst various lenders
Depending on your requirement and personal loan eligibility, consider visiting online lending markets to compare and choose amongst various lenders offering personal loans. Additionally, you must ensure to approach banks with whom you share a long-term relationship. Existing banks tend to provide you loans at a relatively lower interest rate at better conditions. Keep the interest rate offered by your existing banks as the benchmark to compare the interest rates offered by other banks. To compare amongst other lenders, ensure to use a personal loan calculator.
- Check the interest calculation method
You may still end up paying higher interest despite the lenders offering a lower personal loan rate. This is often because of their interest computation method. Thus, before you select the personal loan apply option on the chosen lender’s website, make sure to review their interest computation method. Usually, lenders offer loans on either flat rate or reducing interest rate method. In the case of flat rate method, total interest outgo is computed based on overall loan amount throughout the repayment tenure. However, in the case of reducing interest rate method, the interest rate is calculated on the principal outstanding towards the end of the period. Thus, choosing a flat interest rate method costs you more than a reducing rate method.
Once you have selected your personal loan lender, make sure to compute your EMI for a personal loan depending upon your required loan proceeds, available repayment tenure and interest rate. For this calculation, you can use an online personal loan EMI calculator. Such calculators allow you to compute your loan EMI in seconds according to your repayment capacity.