What is a Reasonable Personal Loan Interest Rate and How to Get it?

Personal loans can be a great way to finance any emergency easily and affordably. Many lenders offer attractive deals, based on your eligibility. Naturally, the most competitive rates are only offered to a select few. But how do you determine a good rate?

Read on to find out.

Reasonable Personal Loan Rates
Generally, lenders offer an interest rate applicable per annum. Depending on the lender, and your profile, these rates can start at 10%, going up to 49.5% p.a. However, to know what a reasonable rate is, you need to break it down on a monthly basis.

Consider the rate applicable on your principal amount every month, and see if it is worth the cost. So, if you get an interest rate of 12%, you are paying 1% interest every month, for a year. This is applicable throughout the tenure, which can work out to be quite expensive.

A reasonable rate would be one under 10% p.a. Depending on your personal loan eligibility, some lenders may even offer a loan at 8.5% p.a., which is a great deal. With such a rate, the cost of borrowing is low, and payments are very affordable.

However, not everyone can qualify for such rates. Thankfully, you can strategize to get the best personal loan interest rates. Here are some tips to try.

Research and Compare the Offers
Conducting adequate research about different options and schemes available plays a vital role when it comes to choosing a personal loan. This is because it helps you to make an informed financial decision after comparing the options available.

Here are some crucial aspects you need to compare to strike the best deal:

• Interest rates offered by various lenders
• Eligibility for personal loans set by different financial institutions
• Charges and fees associated with loans
• Document requirements for loan approval
• Trustworthiness of lenders to help you zero in on the right lender

After careful evaluation, choosing the option that is best for your personal needs is the way to move ahead.

Display Stable Income and Employment
When considering your eligibility for a personal loan, a personal loan lender takes into account your income and employment status. This helps them assess your financial standing and your ability to repay on time.

A steady income and secure employment can increase the likelihood of approval, along with a lower interest rate. In contrast, if your income is unstable, you may have to pay higher interest rates or even face rejections.

Apply for Loans Infrequently
Applying for loans within a short span of time can have a negative impact on your financial profile. The lender may view you as a credit-hungry individual, or an applicant that is overly reliant on credit.

Also, loan applications lead to a hard inquiry into your credit report, and these inquiries lower your credit score. As such, too many inquiries in a short amount of time can lead to a noticeable dip. Hence, applying for new credit infrequently is a wise decision.

Choose Loans with Lower APR
Annual percentage rate (APR) refers to the amount of interest you pay on a sum of money you have borrowed as a loan. It is calculated in the form of a percentage.

The APR in India is calculated by considering factors such as loan tenure, interest rate and fees charged by lenders. Opting for a loan with a lower APR can have several benefits, such as:

• Reduced loan expenses
• Lower EMIs
• Better financial planning
• Easy comparison of loan offers

This percentage conveys the actual yearly cost of borrowing. It helps you compare which lender is more beneficial and get the best personal loan interest rates.

Maintain a Good Credit Score
A credit score of 750 and above is considered an excellent credit score, which indicates a lower risk of default and increases the likelihood of your loan approval.

If you have a high credit score, you may get a lower rate of interest on the loan owing to the lower risk factor for the lender.

Opting for the right personal loan can be cost-effective in the long run while making you pay lower monthly instalments. Hence, gauge these factors to find a suitable lender offering reasonable personal loan interest rates.

To find the most suitable personal loan option available, it is crucial to plan and manage your borrowings wisely. One key strategy is to use an EMI calculator to get an estimate of your EMIs.

Before deciding on a final option after checking your eligibility for personal loans,it is essential to consider both the total payable interest and monthly instalments. You also need to look out for fees and charges associated with the loan to avoid any surprises.