Tuesday, September 27, 2022

How to Keep Your Personal Loan Rate of Interest in Check?

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The unsecured nature of personal loans have made them a popular borrowing option for many, be it individuals, households, or businesses. To avail a personal loan, you only need to fulfil a handful of eligibility criteria and provide a few related documents as a proof of such eligibility.

A complete lack of asset involvement keeps the borrower free of any risk to their property ownership claim-free. Further, a personal loan is easily accessible too through a simple online application, which means you do not need to step out of your home to avail the loan. All you need to do is fill up the online application form with necessary details accurately and submit with the required documents.

However, the absence of any collateral, also makes these advances a high-risk lending proposition for financial institutions. To mitigate such a risk, lenders thus often levy a higher personal loan rate of interest than that for secured advances. While  this may sound uncomfortable for borrowers, it is not really so since the loan is often a mid-term advance and easy to repay in low EMIs, which makes it suitably affordable for all. Not to mention, you can always utilise a few ways to bring down the interest rate levy on these loans. Here are some of them listed under.

Meet All Eligibility Requirements

As the chances of approval for the advance hinge entirely on the eligibility fulfilment of the prospective borrower, it is a must that you check all if you meet all of them before you apply for a personal loan.

Fulfilling all criteria makes you able to avail funding with ease as it helps determine your borrowing  as well as repayment capacity. Commonly, you need to be an individual between the age range of 20 and 70 years with a stable occupation to avail the loan. You can either be a salaried or a self-employed individual with a certain number of years of experience in the respective occupation. You must also be a residing Indian citizen with a residential stability of at least a year to avail the loan. Fulfilling all requirements helps keep your risk profile low, thus enabling easy approval of low personal loan rate of interest.

Apply with a Credit Score Above 700

A minimum credit score is another essential criteria that you must meet to avail a personal loan affordably. Ideally, a minimum score of 700 is required to be able to avail the unsecured financing option. However, it is best to keep the rate at the highest, going above 750.

A credit score is a quick indicator of the history that the borrowing individual carries related to the past credit options they have availed, be it loans, creditt cards, or any other instrument. It allows the lender to determine the risk associated with the applicant, thus helping them assess how much to lend and at what rate to cover the risks involved.

Provide All Documents Related to Primary and Secondary Income

The amount of income you earn monthly and its stability is a determinant factor that helps lenders identify your repayment capacity. Accordingly, they take various lending decisions, the personal loan rate of interest and charges to levy being one of them. A high income capacity and stability thus helps fetch affordable rates and vice versa.

It is thus suggested for aspiring borrowers with multiple income sources to provide all related documents as income proof to amp up their repayment capacity. It shall help reduce the rates significantly.

Apply Under Your Maximum Loan Eligibility

It is also advisable to apply for a loan amount within your maximum eligibility as it keeps the repayments affordable with low EMIs. Such a financing also means reduction in the total loan liability, thus keeping the loan affordable.

Further, when making a borrowing decision, choose to keep your EMIs low for better accommodation of the EMIs in your monthly income. All of this shall help keep the personal loan rate of interest in check, thus making a financing affordable for you.

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