Personal loans have today evolved to be one of the most preferred and affordable financing options that are available at a short notice. These advances come with several borrower-friendly features too, which allow individuals to track and manage the advance easily. Nevertheless, despite the features and facilities available for borrower benefit, one must be careful regarding the personal loan rate of interest levy along with the total liability accruing by the tenure’s end.
When availing financing, you can take care to keep a few things in mind and make a few changes to your borrowing strategy to ensure availing the advance at a reduced rate of interest. Alternatively, if you have already availed the loan, you can take necessary steps to reduce your total loan liability as well. Below mentioned are some important steps you can take to curtail your total personal loan liability payable, including ways to ensure interest rate reduction.
How to Reduce Your Personal Loan Rate of Interest?
You can consider the following ways for the reduction of your personal loan rate of interest.
Go for elaborate lender comparison in the financial market
The first and foremost step you should take when availing a personal loan is to consider the available financial institutions and the loan options they provide. Once you have shortlisted a few preferable ones, you can proceed to compare them based on the features and facilities available along with interest rate affordability to find the lender extending the lowest-rate personal loan.
Apply with suitable income stability
When assessing loan applications, financial institutions examine the income stability of applicants to gauge the risk associated with lending to them. It is thus crucial that you convey your income stability to the lender you apply for a personal loan with.
Especially for salaried individuals sending their loan application, their employment with a reputed company can work in their favour of securing affordable personal loan interest rates.
Choose a lower loan amount than the maximum available funds
When opting for a loan amount lower than your maximum eligibility, your repayment capacity ultimately improves. It not only helps accommodate higher loan EMIs but also keeps your risk profile moderate. Lenders can thus easily agree to offer better rates on your personal loan.
Apply with all income documents
Submitting all documents related to your income sources works in favour of your application, allowing you to represent an improved borrowing capacity. It thus helps secure affordable interest rate.
Maintain a high credit score above 750
Credit score is a crucial indicator of one’s creditworthiness and allows the lender to assess if he/she will repay the loan in time or not based on past repayment habits. As a high credit score above 750 indicates disciplined credit behaviour, it helps secure better rates as well.
Apply with a co-borrower
If you do not hold the desired borrowing credibility, you can apply with a co-borrower fulfilling all such requirements as well. Even though you fulfil all the criteria, applying with such a co-applicant can help secure the best rates.
Further, you can take the following few steps to reduce your overall loan liability when you have already availed the advance.
– Part-prepayment: You can prepay a part of your loan liability in lump sum at any time before the tenure ends to save of interest liability.
– Foreclosure: Similar to part-prepayment, a foreclosure facility allows you to close your loan account before tenure ending through complete outstanding repayment, thus saving interest.
Some lenders also provide the balance transfer facility, which allows borrowers to refinance their outstanding loan principal at reduced personal loan rate of interest. The facility comes with other favourable terms as well, which help manage the loan more efficiently than previously.