According to the Reserve Bank of India, the share of personal loans in the collective loan book has now reached 28%.
In the past 12 months, personal lending has also outgrown the other loan segments with a growth of 17%.
The personal lending segment is thus presently the largest single sector in terms of advances and accounts for around 15% of the total bank credits.
One of the primary reasons behind this upsurge of personal loan borrowings could be the efforts of various lending institutions to assure affordability and accessibility to customers. As the interest rate is a primary determining aspect of a loan’s affordability, it is among the first few critical factors which borrowers consider while availing a personal loan.
Keen borrowers thus look for the best personal loan interest rate to make sure that loan repayment does not become a burden to them. However, there are some considerations which one must make in order to avail the best rate on these advances.
Factors to consider in finding the best personal loan interest rate
Irrespective of the fact whether you are a self-employed or salaried individual, the factors determining whether you avail the best personal loan interest rate or not, remain common. Here’s an elaboration on a few crucial points in this context, which one must keep in mind to avail the best interest rate on a personal loan –
- Your income or earning
The salary or income you earn at a month’s end is the basis on which you are to repay a personal loan. Since it is an unsecured form of credit, lenders expect you to earn enough to be able to clear your debts affordably. So, if you have a convincing income/salary, the lender might charge lower interest rates on your loan.
Thus, when looking for a low interest rate on a personal loan, make sure to present all types of income to improve your repayment capacity. Make sure to calculate your personal loan EMIs beforehand and tally them with your income to gain a clearer idea.
- Your employment details or company status
Lenders try to consider maximum parameters of your employment to be sure of lending you a personal loan with minimised risks, and levy interest accordingly. If you are a salaried individual, the lender would consider the following factors:
- The sector you work in.
- The organisation you work for.
- Your status in that company.
- Chances of your promotion or increment.
- Employment history.
Lenders also scrutinise the business or professional details of self-employed individuals before finalising the best personal loan rate for them. If your employment prospects look convincing, the lender will automatically be keen to lend you the funds at a reasonable interest rate.
- Your CIBIL score, credit report, and payment history
You must take CIBIL score calculation seriously if you are planning to apply for a personal loan soon. A lender would check your credit score and repayment history before processing your loan request. The interest rate they charge might also vary according to your score, with higher rates standing a better chance of receiving the advance at reduced rates.
You might be able to avail a personal loan with low CIBIL score, but the interest levied could be set higher. You can check how to get a personal loan with a poor CIBIL score if you require funds urgently. Nevertheless, it is of considerable importance to keep your repayment habits in check for a better score, which would help secure affordable rates.
- Negotiation with the lender
It is the final and one of the most crucial factors to avail the best personal loan interest rates. You must discuss your queries, requests, and concerns in detail with a lender to negotiate on the terms of lending, including the rates charged. If over the years you have been an ardent customer to the institution, the lender might be convinced to charge lower interest rates on your personal loan post such negotiation. You can communicate with your lender online and even apply for a personal loan online to save your valuable time.
Along with looking for the best personal loan interest rates, you can also look for easy loan accessibility via the likes of pre-approved offers. Lenders like Bajaj Finserv have extended these offers to existing customers to make borrowing hassle-free. Also, these offers are available on multiple financial products. You can check your pre-approved offers right away only with a few necessary initials.
Once you have understood how each of the factors mentioned above plays a role in determining your personal loan interest rate, you can start proceeding accordingly. Start with comparing different rates charged by various lenders, so that you get a brief idea about the average ongoing rates. Make sure to make an informed decision while choosing your ideal lender for the best personal interest rate.