Personal loans are generally taken in India for satisfying one’s current financial needs, but do remember a higher rate of interest can increase repayment difficulties. Now, it is interesting to note that, even when you’ve taken a loan, there are certain methods which you can adopt so as to lower your personal loan rate of interest and lighten your overall financial burden.
Below are some important points to take into consideration, so that you can aim at reducing your personal loan interest rate, even post availing a loan:
Improving your credit score
It is essential to have a good credit score so that you can obtain good terms of a loan. A good credit score informs and assures the lender that you are a reliable borrower, for which you get low interest rates. Pay the EMIs and credit card bills in time and keep your credit utilisation ratio less than 30% to improve your credit-worthiness, reliability and trust. Regular checks for mistakes in the credit report must be conducted as well.
Negotiating with your lender
If you have been a regular customer of your bank or been making regular payments as per your EMI terms, you can negotiate a lower interest rate by having a prompt discussion with your lender. Show your bank or lending institution evidence of your financial stability in the form of salary slips, consistent repayments and income tax returns to strengthen your case.
Banks are always willing to offer better terms to regular customers, especially during festival seasons or promotional offers. Open communication, fair discussion with your lending institution are crucial here.
Balance transfer options
Transferring your existing loan to a different bank with a reduced interest rate can reduce your burden to a large degree. This is a balance transfer, and it lets you take advantage of better terms offered by other banks.
For example: IndusInd Bank offers personal loans at 10.49% p.a., while Bank of Maharashtra reduced its rates to as little as 10% p.a. following the recent repo rate reduction by RBI.
Therefore, you can consider deploying such strategies to reduce your personal loan interest rate even after availing a loan. The focus here should be on remaining vigilant and aware of the ongoing developments in the world of loan disbursement.
Other efficient strategies
- Increase loan tenure: Lenders may charge lower interest rates for longer loan tenures, though this will lead to a greater total paid in interest in the long run. You need to also clearly understand if there are any hidden charges associated with increasing your loan tenure.
- Look for special offers: Watch out for seasonal discounts and promotional offers by lenders, which are temporary remedies at best.
- Maintain a low debt-to-income ratio: Showcasing financial discipline by keeping your debts in check can also result in more favorable loan terms.
Therefore, by following these simple steps, you can reduce your interest rate on your personal loan even after the loan disbursement, and thus your payments will be lighter.
Disclaimer: Loans involve risk and terms vary between banks. Please consult your financial adviser for personalised advice.
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