Personal loans are a popular choice for financing major expenses, consolidating debt, or covering emergencies. However, the interest rate you receive can significantly impact the overall cost of the loan. A lower interest rate reduces your monthly EMI and the total repayment amount, making the loan more affordable. In this blog, we’ll explore the factors that influence personal loan interest rates and actionable tips on how to get a personal loan at low interest. By the end, you’ll be well-prepared to secure a loan with favorable terms.
Factors Affecting Personal Loan Interest Rates
Before diving into tips, it’s essential to understand the factors that lenders consider when determining the interest rate:
1. Credit Score
Your CIBIL score is one of the most critical factors in determining the interest rate. A higher score (750 and above) indicates responsible credit behavior, making you eligible for lower rates.
Related Read: What is CIBIL score and why is it so important?
2. Income Level
A stable and high income assures lenders of your repayment capacity, leading to lower interest rates. Borrowers with lower incomes may face higher rates due to perceived risk.
3. Loan Amount
The amount you borrow can also affect the interest rate. While smaller loans may have higher rates, larger amounts often come with lower rates, depending on your profile.
4. Loan Tenure
Shorter loan tenures typically have lower interest rates but higher EMIs, while longer tenures reduce EMIs but may increase the overall interest cost.
5. Relationship with the Lender
Existing customers of a bank or financial institution may enjoy preferential rates due to their relationship with the lender.
Tips to Get a Personal Loan at Low Interest
Here are 7 tips to get a personal loan with a competitive interest rate:
1. Maintain a High Credit Score
Your credit score reflects your financial discipline. A score of 750 or above significantly increases your chances of getting a loan at a low interest rate.
How to Improve Your Credit Score:
- Pay EMIs and credit card bills on time.
- Keep your credit utilization ratio below 30%.
- Avoid frequent loan or credit card applications.
Related Read: How to increase CIBIL score from 500 to 750
2. Compare Lenders
Different lenders offer varying interest rates based on their internal criteria. Use online platforms to compare rates from banks, NBFCs, and fintech lenders. Look for offers tailored to your credit profile.
3. Choose a Shorter Loan Tenure
While longer tenures reduce EMI amounts, opting for a shorter tenure can lower the interest rate. Ensure you choose a tenure that balances affordability with savings on interest.
4. Negotiate with Your Lender
If you have an existing relationship with the bank (e.g., savings account, credit card), leverage it to negotiate a better rate. Lenders often offer lower rates to loyal customers.
5. Opt for a Secured Personal Loan
Providing collateral, such as fixed deposits, property, or gold, can lower the interest rate. Secured loans pose less risk to the lender, leading to favorable terms.
6. Apply During Special Offers
Keep an eye on seasonal offers or promotional campaigns by banks. These periods often feature reduced interest rates and processing fee waivers.
7. Show Proof of Stable Income
Lenders favor borrowers with a consistent income and job stability. Submitting salary slips, bank statements, or IT returns enhances your credibility and eligibility for lower rates.
Lenders Offering Low-Interest Personal Loans
Here are some banks and NBFCs in India known for competitive personal loan rates:
| Lender | Interest Rate (Approx.) | Loan Tenure |
| HDFC Bank | 10.5% – 21.0% | Up to 5 years |
| SBI | 10.3% – 15.0% | Up to 6 years |
| ICICI Bank | 10.5% – 19.0% | Up to 5 years |
| Bajaj Finserv | 11.0% – 20.0% | Up to 6 years |
| Axis Bank | 10.2% – 17.0% | Up to 5 years |
Common Mistakes to Avoid while applying for a Personal LoanÂ
1. Ignoring the Fine Print
Low advertised rates may have hidden fees or conditions. Read the terms carefully to avoid surprises.
2. Not Comparing Lenders
Failing to compare options may result in accepting higher rates than necessary.
3. Overborrowing
Borrow only what you need. Higher loan amounts increase interest payments and may strain your finances.
4. Choosing Longer Tenures Without Planning
While longer tenures reduce monthly EMIs, they increase the total interest cost.
Benefits of Securing a Low-Interest Personal Loan
Getting a personal loan at a low interest rate offers several advantages:
- Lower Monthly EMIs: Makes repayment manageable.
- Reduced Total Interest Cost: Saves money over the loan tenure.
- Improved Financial Stability: Allows you to allocate funds for other financial goals.
Related Read: Factors Affecting Personal Loan Amount
Conclusion
Knowing how to get a personal loan at low interest can save you significant money and reduce financial stress. Focus on maintaining a strong credit score, comparing lenders, and leveraging your existing relationships with banks to negotiate better terms. Additionally, choosing a shorter tenure and applying during promotional periods can further reduce the interest rate.
Take the first step today by reviewing your credit profile and researching the best offers in the market. For more insights, explore How to Get a Personal Loan Without CIBIL? and learn about alternative lending options to meet your financial needs.
