The consistent growth of the Indian economy is best reflected in the personal finance sector as more people are seen applying for a personal loan in India from various financial institutions across the country.
- In 2021, the total transactional value of personal loans is projected to reach Rs.10,15,395 million at a CAGR of 37.83%.
- The total retail loan book size of Indian lenders is expected to reach Rs.96 trillion in the next five years, says a recent report.
The projected growth in the statistics above clearly represents the rising demand for personal financing, which can be attributed to the increasing propensity to consume and easy availability of low interest personal loans. While credit rates vary from lender to lender, applicants still must compare personal loan rates before applying to any lending institution.
How to get a low interest personal loan?
Personal loan interest rates depend on several deciding factors other than the lender that you opt for. Individuals looking to avail personal loan for various requirements need to keep the following factors in mind.
- Credit score
Lenders use the applicant’s credit score to judge his/her repayment capacity and behaviour. Hence, it is one of the most significant factors affecting the personal loan interest rate. While most lenders ask for a credit score of 750, individuals looking to avail of a personal loan with low interest rates need to have a credit score higher than 750.
One can improve his/her credit score by maintaining a regular repayment schedule. Paying off all existing debts on time and keeping a FOIR below 40% are some things you can do to improve your personal credit score.
- Credit utilisation ratio
Type of credit and credit utilisation ratio plays a massive role in determining the interest rate of a personal loan. Experts recommend maintaining a credit utilisation ratio below 30% to be eligible for a personal loan with low interest rates. For example, consider the following situation:
A credit card holder with a credit limit of Rs.60000 consistently utilises Rs. 40000 out of it. His/her credit utilisation ratio stands at 66.67%. In such situations, any financial institution will think twice about extending unsecured loans, as this shows a credit-hungry behaviour.
- Cite all your income sources
Since getting a personal loan with a poor credit score can be quite tricky, applicants in such situations can use their income credentials to increase their chances of securing a personal loan with low interest rates. You can also calculate your interest rate by using an interest rate calculator.
In addition to the monthly salary, individuals can also submit other income sources such as revenue from a rented property, earnings from investments, etc. Showing proof of a good repayment capacity should help avail better interest rates for a personal loan.
How to apply for a personal loan?
With the advent of the digital loan application, individuals can easily complete the required necessities from the comfort of their home. To apply for a low interest personal loan, follow these steps:
- Fill the online application form available on the official website of your preferred lender. You will need to submit information like personal, employment, and financial details.
- Enter the loan amount and preferred repayment tenor in the respective input fields.
- Submit the required documents to the representative sent by the financier.
- The funds will be disbursed to your account upon loan approval.
To streamline the loan application procedure, lenders like Bajaj Finserv extend several pre-approved offers with minimal documentation. Such hassle-free offers are available on products like small personal loans, business loans, etc. You can quickly check your pre-approved offer using your name and contact details.
The easy availability of such hassle-free offers is one of the fundamental reasons why there is an increase in demand for private consumption. With no end-use restriction, a low interest personal loan can be a life saviour in times of emergency cash crunch. That being said, individuals should make sure to inquire about how the interest rates are calculated to ensure maximum savings over the tenor.