Personal loans are simpler to get as they are unsecured loans and no collateral securities are required to avail such a loan. However, without the need of any underlying securities, interest prices on individual loans are a lot larger than that of secured loans – like home loans, gold loans and so forth.
“Personal loans are unsecured loans that can be used for any purpose that the customer chooses such as urgent purchases, wedding expenses, house renovations, or any other financial needs that have to be fulfilled. In order to avail of a personal loan at a lower interest, the most commonly recommended advice is that one should always keep their credit score healthy, i.e., above 700 or 750. When applying for this type of loan product, some details such as credit history to identify whether the borrower has repaid previous loans on time, income statements to check repaying capability, and a few other relevant documents such as social security numbers, state-issued IDs, etc. are collected,” stated Anuj Kacker, Co-Founder, FREO.
To get some relief on interest price, what you have to do is to sustain a healthier credit score.
“A good credit score is useful in securing desired repayment tenure. Good repayment history of their EMIs also helps consumers to negotiate a better rate of interest on the personal loan. The consumer should always look out for different offers provided by various lenders and should be able to watch out for changes that are announced in terms of rates of interest, charges on loans, and any hidden charges so that they can make the optimum decision in the quickest time for the best rate. A good employment history helps in enhancing the eligibility for securing a personal loan. Additionally, the consumer should always be aware of how the interest is calculated and the terms of the loan so they aren’t surprised. Consumers can also avoid approaching multiple lenders as it affects their credit score and reduces the chances of securing better interest rates,” stated Kacker.
How Fintech players are altering the way credit is perceived in India
According to Pranjal Kamra, CEO of Finology, in order to avail of individual loans at the lowest interest prices, one should really:
1. Maintain a very good credit score: Your credit score depicts your capacity to spend the loan on time. The much better the credit score, the simpler it will be for you to avail oneself of a loan. The lenders determine the interest price, loan quantity and other terms connected to the disbursement of the loan so, in order to avail of a individual loan at the lowest feasible interest price, one ought to sustain a higher credit score.
2. Apply for a secured loan: Non-collateral loans charge a larger interest price due to lack of some safety and thus one ought to apply for a collateralised loan.
3. Apply from the bank alternatively of NBFCs: NBFC’s or private lenders charge a larger interest price and the quantity disbursed is of smaller ticket size. Therefore one ought to apply from a bank to take pleasure in a decrease interest price.
4. Inspect the interest price for a variety of loan tenure: Lenders provide distinctive interest prices for distinctive terms. For instance, for a longer tenure, the interest price will largely be larger.
5. One ought to also keep away from many loan applications: Too numerous loan applications with distinctive lenders will plunge your credit score and this may hurt your probabilities of obtaining a individual loan at a decrease interest price. Try to retain your CIBIL score above 700 for the above matters.
Although individual loans are simpler to get, obtaining one hurriedly might get you trapped.
“In this fintech led environment, lowest interest rate is a relative measure and has moved from the today’s deal of the local moneylender to the APR of the mainstream online loan from a new age fintech. Although fintechs offer a great methodology to get a loan discreetly and without stepping out or standing in line, it is important to understand all costs associated with the loan before they sign the dotted line. Borrowers can use any of the numerous free APR calculators online to understand the cost and compare between products and companies,” stated Anil Pinapala, Founder and CEO of Vivifi India Finance.