4 Things That Will Get You A Lower Personal Loan Rate

  Author: Naveen Kumar

Many of us are aware of the high interest rates associated with personal loans, more so when they are compared to other loans. However, the personal loan interest rates may vary according to individual conditions. Lending institutions look for various comfort factors in the borrowers’ profile which often determine the personal loan rates. It is also based on these comfort factors that they offer their best rate to the preferred borrower. Here are four factors that influence the personal loan rate and help you get the best rate for a personal loan.

Life stage If you are single and in an entry level job, chances are that the lenders may find your profile a higher risk one and may not offer you the best interest rate. Typically, lenders prefer borrowers who are financially well-settled, married and have a family.

Nature of job or profession If you working for a big or reputed organisation like a large private sector company or a large multinational company (MNC) or public sector unit (PSU), lenders may view your personal loan application more favourably.  They are likely to make you eligible for a better personal loan interest rate.

Lending institutions also have a greater preference for established professionals like chartered accountants (CA), doctors and architects. They may offer customised personal loans at their best rate.

Income stability Prospects of continuity and stability of income is always preferred by the lenders. In most cases, they look for at least 3 years of stable income without any disruption. However, if you are in a senior or top management role, many lenders may offer you a personal loan without scrutinising stability of recent earnings.

Credit history If you had made any default in past on the repayment of credit card outstanding balance or any loan, it may affect your credit score adversely. Credit score, arrived at by credit rating agencies, is a critical input for lending institutions while determining personal loan interest rates. A lower score may impact access to a personal loan, the personal loan amount and the personal loan rate. On the other hand, a good repayment track record and high credit score could make your case stronger for a bargain interest rate for a personal loan.

Clearly, personal loan rates are not cut and paste stuff with one rate being offered to all. Much depends on your profile and credit history.

So we took a look at the factors that may affect the rate of personal loan that is offered to you. Keeping these in mind will help you evaluate your eligibility and find the best personal loan.