- May 13, 2020
- Posted by: Ganeshcbani
- Category: Blog
Personal loans have become a viable financial choice for individuals to finance, among others, different needs such as marriages, medical emergencies, holidays. In a highly competitive credit market, consumers often seek the least possible debt risk at the most favorable personal loan interest rates provided by a lender.
The availability of a personal loan at the most reasonable rate depends, however, on several factors and mainly on whether the prospective borrower has the right to a certain loan.
Such eligibility points will help an individual qualify for a personal loan at reasonable interest rates successfully. In short, this is how low rates on a personal loan can be obtained.
Lenders take several factors into account before authorizing a personal loan at cost-effective rates. This helps consumers to benefit from the following metrics while ensuring that no end-use personal loan is available at more competitive interest rates than any applicant.
Types of Low Interest Personal Loans
When you need a low interest personal loan, there are a few different types to choose from.
The most common type of low interest personal loan is the traditional personal loan. With this type of loan, you borrow money from a financial institution and must repay the loan with interest.
There are also low interest personal loans available through online lenders. These loans are typically easier to obtain and have lower rates of interest than traditional personal loans.
Another option for low interest personal loans is the peer-to-peer loan. With this type of loan, you borrow money from friends or family members without having to go through a bank or other financial institution.
The High CIBIL Score
CIBIL score refers to an applicant’s loan worthiness regarding the promise of credit amount repayment. Lenders consider the CIBIL Information Report (CIR) of the borrower when determining the key numbers, interest rates, tenors and EMIs for repayment.
Persons with CIBIL ratings of 750 and higher will negotiate on their personal loans with financial institutions to ensure access to competitive interest rates and acceptable tenors. Candidates with higher CIBIL ratings are less likely to default on the loan amount and interest. NBFCs thus pay low interest rates on their personal loans relative to people with lower CIBIL ratings.
Moreover, lenders are focusing on outstanding CIBIL scores from borrowers because personal loans are not secured and they have no collateral protection to revert to defaults. Higher CIBIL scores are seen as a loan repayment guarantee.
Overall debt-to – income ratio
The debt-to – income ratio reflects the amount of an individual’s income expended on repayment of accumulated debts. The Fixed Income Ratio Duty (FOIR) is also used for this function.
Persons with FOIR below 50 per cent are more likely to benefit from competitive interest rates on personal credit from financial institutions. NBFCs also review an applicant’s FOIR to check eligibility for personal loans.
Customers who are already servicing previous credit should use improved debt repayment techniques to reduce the debt-to – income ratio substantially while applying for a personal loan. Lenders refuse to extend loans to individuals who already have to spend a substantial part of their monthly income to repay current loans.
The clear work history
NBFCs allows personal loans to workers with reliable job history during their careers. Persons with a fixed source of income can therefore easily manage their repayment schedule.
An individual with a fluctuating work history implies a disturbed accumulation of income in the future. Lenders see these people as risky borrowers and thus place higher interest rates on individual loans to ensure short-term interest income.
Applicants should consult lenders on how much personal loans they will expect to efficiently manage their finances.
Applicants will benefit from a variety of lenders’ online personal loans at cost-effective interest rates and fast disbursements.
Specific NBFCs such as Fullerton and Bajaj Finserv provide personal loans up to Rs.25 lakh with minimal paperwork and no secret charges. This financial institution also uses loans in a trouble-free manner with previously approved offers for both personal and financial loans, including business loans, home loans, credit cards, etc.
Applicants may use the competitive interest rates on personal loans by taking into account the financial techniques described above. A low debt-to-earner ratio and clear job record raise the probability of personal loan approval automatically.