Taking A Personal Loan? Here's How To Get The Best Interest Rate

A personal loan is a quick and convenient way to get funds without needing to offer any collateral. Many people turn to it for everything from home repairs and medical bills to travel plans or managing big purchases. Since it’s unsecured, the interest rate you get largely depends on your credit profile and lender policies. That’s why it’s important to understand how to qualify for the best possible rate – so you don’t end up paying more than you need to.

Here are some tips to get the best interest rates

Your credit score is one of the most important factors lenders consider when deciding your interest rate. A higher credit score (750 and above) signals that you’re a responsible borrower.

How to improve it:

• Pay your EMIs and credit card bills on time.

• Keep credit utilisation low (below 30% of your limit).

• Limit multiple loan or credit card applications within a short time.

• Check your credit report regularly for errors and rectify them immediately.

Interest rates can vary significantly across banks, NBFCs, and digital lenders. Don’t go with the first offer you get; compare the rates.

You can use online aggregators or loan comparison websites to check different offers side by side. Factor in processing fees, foreclosure charges, and other hidden costs in your comparison.

A longer loan means smaller EMIs, but you’ll pay more interest in the end. Choosing a shorter loan term can help you save money on interest.

Example- A Rs 5 lakh loan at 11% for 5 years would be Rs 1.53 lakh interest. The same loan for 2 years would equal around Rs 58,000 interest.

These offers often come with lower interest rates, little or no paperwork, and fast processing. Since the bank already knows you, the process is easy. If you have been a loyal customer, you might even get a better deal by asking for it.

Take advantage of festive or seasonal offers while applying for a personal loan. Lenders often reduce interest rates or waive processing fees during festivals like Diwali, Christmas, or New Year. Some banks also give special pre-approved deals to their existing customers during these times. So, applying during a festive season could help you get better terms and save money.

If your income or credit score is low, applying with a co-applicant can improve your chances of getting a personal loan and may even help you get a lower interest rate. A co-applicant can be your spouse, parent, or sibling who has a regular income. Keep in mind, both your credit scores will be checked, and if the co-applicant fails to repay, you’ll also be held responsible.

Lenders prefer giving personal loans to people who have a steady job and regular income, especially if they work with well-known companies. To get better rates, it helps to have at least 2 years of total work experience and be with your current employer for at least 6 months. Your salary should come in regularly, ideally into a bank account. If you're self-employed, you may need to show your income through IT returns and GST filings.