Getting a personal loan is an easy task today. When you have a stable income and a good credit history, lenders will be knocking on your door with offers of instant personal loans! In fact, you can apply more easily than ever before by using a loan app, on which you can even upload documents on the go.
With minimum documentation and quick processing, instant loans are easy to sign up for. However, with the easy availability of such loans from multiple lenders, it is important that you pick the ideal deal.
This requires you to pay attention to the repayment schedule and choose the lowest interest rate. Read on to learn how you can compare personal loan interest rates and choose the best option for yourself.
How an EMI Calculator Can Help You Compare Personal Loan Interest Rates
Use the EMI calculator on the loan app or lender’s website to get started. This digital tool requires you to fill in the rate of interest, tenure, and the loan amount you are applying for. Based on these three details, it gives you your EMI or monthly installment.
Using this calculator is the best way to compare personal loan interest rates. This is because it gives you a clear idea of which rate is better for you in terms of repayment. Keeping all other factors the same, a lower interest rate leads to a lower EMI and vice versa.
In fact, a lower rate of interest also leads to lower interest dues over the course of the tenure. The interest dues are also mentioned by the EMI calculator. This makes the comparison of different rates very easy.
For example, consider a loan of ₹1 Lakh with a repayment tenure of 5 years at an interest of 12% from Lender A. Using the EMI calculator, your EMI will come to ₹2,224 per month. The interest payable over the five-year tenure comes to approximately ₹33,467.
Now, say you get an interest of 14% from Lender B and keep the rest of the figures the same. With a 14% rate of interest, the EMI increases to ₹2,327 per month and the interest payable over the five-year term increases to about ₹39,610.
As you can see, your monthly installment and total interest increased by ₹103 and ₹6143, respectively. In percentages, this was an increase of 4.5% and 18.35% with an increase in interest rate by only 2% from 12% to 14%.
Being able to clearly see the impact of the interest on your EMIs and total dues helps you make better borrowing decisions. This is why using the EMI calculator is the best way to compare the interest rates of various lenders when you are looking to apply for a personal loan.
4 Tips to Get the Best Personal Loan Interest Rates
Here are some of the ways in which you get the most competitive interest rates on your personal loan.
- Look For Seasonal Offers
Lenders periodically offer discounts on interest rates during the festive season. If your need for finances is not urgent, wait for such seasonal offers from various banks and NBFCs. Any reduction in the interest rate can help you save money and repay more comfortably.
- Make Sure Your Credit Score is High
Your CIBIL score is the first factor any lender checks upon receiving your loan application. So, ensure that your credit score is high. This score is based on your previous payment history on credit cards and loans as well as credit utilization and experience.
When applying for an instant personal loan, make sure you check your CIBIL score. If it is under 700, take steps to improve it and only then apply. The interest rate offered by the lender will be high in case of a low credit score and vice versa. Usually, a score above 750 can help you get an affordable personal loan.
- Ensure That You Fulfil the Loan Eligibility Criteria
Lenders set eligibility terms to reduce the chances of a borrower defaulting on the loan or delaying EMIs. In cases where the applicant meets all the loan eligibility requirements, the interest offered is bound to be lower as the lender assumes a higher probability of timely payments.
So, make sure you meet all the terms to get a competitive rate of interest. If not, check the terms of other lenders and apply for a loan from an issuer whose criteria you can meet.
- Compare Offers from Different Lenders
Like purchasing any other items, you need to shop around to get the best rate. Instead of going for a personal loan offered by your bank or previous lender, check rates in the market. Choose a lender with the lowest rates, but only after you understand all the terms.
Some lenders may offer lower interest rates, but the processing fee may be higher. So be careful and make your decision taking all charges and terms into consideration.
Now that you have all the information on how to choose the ideal loan interest rate, shortlist the best options. Check offers from top banks and NBFCs on the Bajaj Markets App. Download it on Google Play or the App Store to find a personal loan with the best interest rate.