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7 Ways To Get The Best Personal Loan Interest Rate

Personal loan interest rates tend to be a little higher than those on auto and home loans, mainly because a personal loan is a form of unsecured borrowing. That said, in the recent past, the RBI has cut the repo rate multiple times and a lower repo rate implies reduced cost of borrowing. Further, irrespective of RBI’s lending rate, you can secure a personal loan on favourable terms by scouting for the best offering, being tactful in your borrowing, and maintaining healthy financial habits.

To help you borrow affordably, here are seven ways to get the best personal loan interest rate.

Compare Lenders And Look For Value-Added Offerings

It’s important to pick the right lender. You can start by using a personal loan calculator to evaluate your EMI payments with different lenders. Next, check the fine print for other associated, ancillary and penal charges and make sure that you are getting good value for money.

Maintain a Healthy Credit Score

Your credit score is a numerical representation of your credit history and gives lenders insight into how you have handled debt in the past, what kinds of loans you have taken and how much of your available credit you utilise. As such, this 3-digit parameter is of vital importance and the higher your credit score is, the lower the personal loan interest rates will be.

Paying your credit card bills in full, servicing loan EMIs on time, limiting your credit utilisation, clearing debt faithfully, checking your credit report for errors and avoiding multiple loan applications during a short time-frame are ways by which you can boost your creditworthiness. In short, creditworthy individuals possess negotiating power, which is important if you want to secure a low interest rate on your personal loan.

Ensure That Your Debt-To-Income Ratio is Low

Similar to your credit score, another parameter that lenders evaluate is your debt-to-income ratio. It gives lenders insight into your cash flow management and basically sheds light on how much of your monthly income you can channelize towards repaying the personal loan. In terms of figures, if you find that your total EMI outgo, all borrowings and the personal loan included, crosses 50% of your monthly income, you should step back to re-evaluate your finances.

Having half of your income goes towards debt payments can be burdensome and according to some lender’s personal loan eligibility terms, you must have a debt to income (DTI) ratio of 40% or less to obtain a loan. Having a very low DTI ratio assures lenders of repayment and so, makes way for a favourable interest rate.

Consider Taking a Floating Interest Rate Loan

The interest rates on floating rate loans change with market conditions and the RBI’s repo rate. As a new borrower you stand to benefit more, since as of 1 October 2019 the RBI has asked for all floating rate loans to be linked to an external benchmark. Further, with the reduced repo rate of 5.15%, you can obtain a personal loan on cost-effective terms and benefit from pocket-friendly EMIs.

Opt For a Shorter Loan Tenor

Lenders consider, through your credit score and DTI ratio, your ability to repay the loan before approving your application. However, they do not have an absolute guarantee that your financial makeup will remain the same through the repayment tenor. As such, opting for a shorter tenor lends more assurance in terms of repayment and this can help you secure a lower personal loan interest rate.

Check The Interest Calculation Method

Lenders may often quote loans at a flat rate of interest. In the case of a flat interest rate loan, the interest is calculated on the initial principal amount. This gives you a higher effective interest rate when you do the math. On the other hand, with a reducing interest rate loan, the interest is calculated based upon the balance principal amount, at any given time.

Apply With a Creditworthy Individual

If you aren’t able to meet your lender’s personal loan eligibility terms, you can always consider a co-signer. This can prove to be cost-effective as well, especially if the co-applicant has a stellar financial profile. Further, with the greater amount of income behind repayment, you can look forward to competitive personal loan interest rates.

You can choose from different lenders based on their personal loan terms. For instance, when you opt for the Bajaj Finserv Personal Loan, you get access to funds up to Rs.25 lakh for a flexible tenor of up to 60 months and at cost-effective personal loan interest rates. Further, you can avail the flexi loan facility, which allows you to withdraw from your sanction multiple times without the requirement to make fresh applications while only paying interest on the amount withdrawn. You can also reduce your EMIs by up to 45% by paying interest-only EMIs for the initial part of the tenor.

To obtain a personal loan tailored to your financial profile, avail a pre-approved loan offer. Just provide your name and contact number to check the offer today

Simple Tips to Make The Most Out of Your Personal Loan

According to the latest data collected by the RBI, personal loans witnessed a 20.4% growth between 2017 and 2018. 

The recent surge in borrowing can be owed to several reasons, like affordable interest rates, easy availability of advance from various lenders, etc. However, even though individuals look to avail more personal loans, they seldom utilise the credit to get maximum benefits from it.

To make the most of the advance, you should look for certain features that will allow you to enjoy its maximum benefits. You should also carefully select a financial institution that offers maximum features that allows you to make the most out of your personal loan. Following are a few tips that can help you to get the easy personal loan from financial institutions with optimum features.

Things To Look For Before Availing a Personal Loan

A personal loan is an unsecured advance that has no end-use restrictions. However, lenders may impose stricter requirements since they are collateral-free. Thus, you should carefully go through the features and benefits offered by a financial institution before applying to make sure you get the most from it.

Following are the best tips to take out a personal loan-

  • Seek out affordable EMI options

You should look for a financial institution that offers affordable interest rates and other expenses that can help you to reduce your payable instalments. Different lenders charge a different interest rate, and it is better to go through additional charges that are levied on the credit before selecting a particular financial organisation. These factors can increase your monthly payments by a significant margin.

  • Select a lender that offers a large loan amount 

Check the total loan amount you can avail from a particular lender before selecting a particular product. Institutions like Bajaj Finserv offers one of the best personal loans, with a high loan amount of up to Rs. 25 Lakh that can help you to meet your short term personal obligations without any hassle.

  • Look for instant approval

Look for financial institutions that give you instant approval on your advance. For instance, with financial institutions like Bajaj Finserv, you can avail instant approval on your advance in less than 5 minutes.

Additionally, they also bring pre-approved offers that can make availing the loans faster and easier. These offers are available on various financial products, including home loans, personal loans, business loans, etc. You can check your pre-approved offer by sharing your name and phone number.

  • Fast disbursal process

Avail the loan from a financial institution that offers a fast disbursal process. There are several NBFCs which disburse the loan to your bank account within just 24 hours of approval. Fast disbursal allows you to avail the unsecured personal loan and tackle your financial requirement with ease.

  • Check for hidden charges

You should look for a financial institution that maintains 100% transparency with the entire process of loan application, approval and disbursal. Check for any hidden charges, and gather every information about the advance before you avail it. It will allow you to utilise the credit to the maximum without worrying about any hidden fees and charges.

  • Avail advances with flexible tenor

Some of the best personal loans usually comes with a flexible tenor between 12 and 60 months. Before you avail the credit, make sure you choose the tenor that allows you to repay your loan without hassle. It is better to opt for a shorter tenor because it helps to lower the total interest amount you need to pay against your advance. 

When you ask the question of “which NBFC is best for personal loan”, the points mentioned above can help you to find out the answer. Look for a financial institution that offers the above mentioned features and benefits with their personal loans to make the most of it.

Also, make sure you check how to apply for personal loan, the eligibility criteria and documents required to avail the loan to make sure that you don’t face any hassles during the application process. Thus, with these things in mind, you can get the maximum benefits out of your loan.

A Guide for Self-Employed Individuals Looking for a Personal Loan with no Income Proof

Documentation and verification is one of the most crucial part of applying and availing a credit. When you apply for a personal loan for self-employed, you are required to furnish certain documents, including your income proof. 

The papers that you can provide as income proof are profit and loss statements, income tax returns, etc. Such income proofs are necessary for the lenders to judge the repayment capability of the borrower. However, there may be cases where the applicants might not be able to provide their income proof documents.

Fortunately, there are several ways which allows you to avail personal loans with no income proof. Let’s take a look how you can avail other forms of credit when you do not have adequate income proof. 

Loan against gold

Applicants can avail loans against gold and gold ornaments. The advanced amount of a loan against gold depends on the value of the ornament or the gold bar. Furthermore, such advances have a shorter tenor compared to loan against property. 

Joint loans

Individuals can easily get a collateral-free business loan by availing joint loans with a co-applicant who holds income proofs, has a good credit score and a regular source of income. In such cases, you can be a co-applicant without income proof. 

Loan against fixed deposits

You can avail loan of up to 90% of your fixed deposit amount from several financial institutions. 

Loan against property

You can also opt for a secure loan by mortgaging your house, or property, against the loan amount. The value of such credits is substantial, and you will also enjoy a prolonged tenor. The ownership of the mortgaged property lies with the borrower and gets transferred only when you default on payment. Applicants also enjoy tax benefits under section 37(1) and section 24 of the income tax act. 

Interest rate

The interest rate for such personal loan for self-employed with no income proof can be slightly higher than those with income proof. Thus, before you avail such advances do make sure to inquire your lender about the interest rate and other applicable charges on your loan. One of the best times to get an unsecured business loan with no income proof is to apply for them at an earlier age. 

Eligibility criteria

There are certain eligibility criteria that you have to fulfil to avail such a credit. Here are some of them:

  • Age: Applicants have to be between the age of 25 and 55 years. 
  • Business vintage: Your firm should be a minimum of 3 years old. 

Also, you should be a resident of India residing in any of the cities where your lender operates. 

Required documents

Apart from income proof, the other documents required for a business loan are:

  • KYC documents- like Aadhaar card, PAN card, voter ID, passport, driving license, etc. 
  • Address proof- such as electricity bills, water bills, gas bills, telephone bills, etc. 
  • Business existence proof- such as GST certificates, SEBI registration certificates, SSI registration certificates, partnership deeds, etc. 

In addition, to avail a personal loan for self-employed, you will have to provide your recent passport-sized photograph and other relevant financial documents like account statements. 

Besides, if you do not have income proof, you can avail advances from personal lenders or can also consider peer-to-peer funding. You can also appoint a salaried co-applicant while you avail such credits without income proof. 

You are likely to have a higher chance of securing a loan if you hold a credit score of 750 or higher. There are several ways of improving your credit score. You can use a credit card to make smaller transactions. Repay the due amount on time to ensure your business CIBIL score stays above 700.