What’s a Personal Loan? How Can You Get A Low-Interest Rate Personal Loan?

Dream big! Desire bigger! We are here just for you and to make it happen, so no holding back anymore!!!

This seems to be the motto for many financial institutions like banks, NBFCs (non-banking financial companies) and even digital lenders.

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Today, loans play a crucial role in many of your lives and their easy access definitely makes things more affordable and convenient for many of you facing budget constraints. Among the many services provided by financial institutions, personal loans are a form of credit option, which is popular among many to meet your immediate monetary shortfalls.

If you go through the definition and uses of personal loans, then you will understand this credit option has a far-fetched use and comes with various benefits, which you can make the most of to keep your finances stable and in control. Read on below to know what a personal loan is. What are the healthy credit habits you must adopt to get the lowest personal loan interest rates as per your preference? And how can a personal loan EMI calculator allow you to shortlist a prudent lender as per your suitability and cash inflows?

What’s a personal loan?

A personal loan, in finance, is the lending of money by a financial institution like banks, NBFCs or digital lenders to you, i.e., the loan applicant to meet your various financial mismatches or monetary shortages. The loan product comes with no end-usage restrictions. This means you can use the proceeds from a personal loan for any purpose, may it be personal or business. However, you cannot use the personal loan proceeds for any speculative purposes. As the allowed proceeds in the case of a personal loan may range anywhere between Rs 50,000 and Rs 40 lakh, this comes as one of the ideal choices for meeting your expenses linked with your child’s higher education, wedding, home renovation, travel abroad, business needs or to meet the down payment expenses of your vehicle or home loan.

Thus, it can be stated that it is a preferred financing option owing to the benefits that it provides like flexibility in usage, hassle-free and stress-free documentation with comparatively quick processing. So, no matter whether it is a medical emergency or a fund shortage during a wedding celebration, with an instant personal loan, you can simply avail the funds on the same day of placing the application for the loan. However, note that in the case of regular personal loans, the processing of loans is slightly longer, i.e., it takes nearly 2-7 days to get processed.

While personal loans in India are mostly unsecured in nature and offered by most lenders, there are a few lenders, especially digital lenders, who may not offer you the loan proceeds until you provide security or collateral. Note that secured personal loans in India are uncommon and are usually availed by college, and school students or homemakers. Digital lenders ask for collateral to offer the loan proceeds as the applicants availing the loan often have no past credit history or credit score. Collateral is the only way a digital lender may trust such applicants and provide them with the required loan proceeds.

Also Check: Personal Loan EMI Calculator

What are the healthy credit habits you must adopt to get the lowest personal loan interest rates as per your preference?

Financial institutions factor in multiple parameters to consider your personal loan eligibility chances. These include your credit score, job profile, monthly income, and your employer’s profile. Here are the crucial tips that can allow you to get the lowest personal loan interest rates.

Maintain a strong score

If you are one of those holding a strong score of 750 and above, you have extremely high chances of personal loan approval. This is because, if you hold this credit score, you are looked upon as a financially more disciplined individual who holds a lower credit risk. This, not just boost the lender’s trust in you but also indirectly enhances your chances of availing a personal loan at a lower rate of interest.

For a healthy credit score, you must make sure to follow certain healthy credit practices like repaying your credit card dues and loan EMIs in full and by the due date, limiting usage of your credit card usage ratio to within 30 per cent, carefully watching the co-signed or guaranteed loan accounts, avoiding direct multiple credit application enquiries in a short time-span and maintaining a balanced mix of credit to form and maintain good credit record and score.

Maintain a healthy banking relationship 

When opting for a personal loan, make sure to first enquire with the lenders with whom you already have a long-term good relationship. Among various lenders providing personal loans, many tend to offer personal loans at a preferential rate of interest if you are an existing customer of the bank. Note that such banking relationships may be in the form of savings, current, fixed or recurring deposits; salary, credit card or loan accounts.

Hence, if you are one of those looking to take up a personal loan, then you must begin your search for a loan by first contacting your bank or NBFC with whom you share a banking relationship. Once you have checked with your financial institution, you can visit online lending marketplaces, to check if there is any other lender providing you with a personal loan at a lower interest rate with suitable terms and conditions. In case yes, then you may go for it, and if not, then you may consider availing a personal loan from your financial institution.

How can a personal loan EMI calculator allow you to shortlist a prudent lender as per your suitability and cash inflows?

If you are still confused between the financial institution with whom you share a banking relationship and the lender whom you came across on the online lending marketplaces, then to make an informed decision you can use an online personal loan EMI calculator. An online personal loan EMI calculator, basically asks you to provide 3 major details, i.e., your required loan proceeds, offered interest rate and preferred loan tenure, to compute your EMI, overall loan and interest constituent. Note that, you can make changes to any of the 3 asked details on the calculator to derive the outcome of your choice and budget. Once you are aware of the prudent figures of your choice, you can negotiate with the lender for the same figures.

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