Gone are the days when you had to ask your friends and family for any financial help. Whether going on a weekend trip, buying an expensive smartphone, or simply funding your higher studies, a Personal Loan can make you self-reliant.

The best part is you can apply for Personal Loan online with any security, that too online at best interest rates. It seems hard to believe. But new-age lenders like Clix Capital have made it possible. All you have to do is fill in the application form, submit supporting documents, get instant approval and receive money in your account.

An unsecured Personal Loan is one of the most preferred and economically viable credit instruments to deal with a financial crisis. These loans have an unrestricted end-usage which means there are no preconditions on how we can put them to use.

Unsecured Personal Loans do not require the borrower’s collateral as security, are disbursed almost instantly, have very basic eligibility criteria and require minimum documentation. Unsecured Personal Loans have many significant advantages, making them an ideal solution during a financial crunch.

However, the common perception is that Personal Loans have a higher interest rate, but then there are ways you can adopt to secure lower interest rates on them.

Tips to get the best interest rates on unsecured Personal Loans:

Improve your credit Score

A credit score is fundamental to the loan approval process. Almost every lender factors the loan applicant’s credit score while setting interest rates. Applicants with a higher credit score are at an advantage of being offered attractive interest rates compared to those with lower scores. A credit score of 750 and above is considered favourable and can get a reasonable interest rate.

Adopting certain responsible financial habits can help achieve this score.

  • Repay your credit card bills before the due date
  • Keep your credit utilisation ratio under 30%. This means using only 30% of the credit line available to you.
  • Pay your EMIs on the designated dates, do not default on payments.
  • Don’t make multiple loan application queries simultaneously, as these are treated as hard inquiries by the credit bureaus, which affect your credit score.

Review your credit score for discrepancies

You don’t just have to maintain a good credit score; you must check your scores periodically for discrepancies. If there are errors in your credit report, it adversely affects your credit score. Therefore, if you plan to apply for a Personal Loan and get a reasonable interest rate, you should check your credit reports from time to time to identify such errors and take the required steps to rectify them.

Check the interest calculation method.

Sometimes lenders offer a low-interest rate, but the amount you pay is higher towards the end of the loan tenure. This is due to the difference in calculating the total interest payable between different lenders. There are multiple methods to calculate interest rates, such as a flat or a reducing interest rate, where the EMI amount gets affected. Availing of an unsecured personal loan at a reduced interest rate could cost you less than getting the loan at a flat rate.

Maintaining a clean repayment history.

If you pay your credit card bill entirely before the due date and are on time regarding EMI repayment, your chances of negotiating a lower interest rate with the lender are much higher. Since your track record indicates a responsible and reliable borrower, it instils faith in the lender as they view you as a favourable borrower. Your chances of getting a lower interest rate become high.

Compare interest rates

Don’t go by the first lender you come across. Review the eligibility criteria of multiple lenders – you can do this individually on a few websites or an online financial marketplace. This will help you better compare the offers being made by different lenders and secure the best deal. Once you know you have met the eligibility criteria of a few lenders, check the interest rate offered. You have a high chance of getting a reasonable interest rate from someone you have borrowed in the past (provided you have repaid on time) or a lender whose financial services you use. Check with your existing financial institution if they offer unsecured Personal Loans at a relatively cheaper interest rate due to your pre-existing relationship.

Keep an eye out for seasonal offers.

Lenders launch attractive schemes that offer unsecured Personal Loans at lower interest rates during the festive season or when the end of the financial year is nearing. At times they even waive processing fees or increase the loan amount. They even provide pre-approved loans at attractive rates and flexible repayment terms. That is a great time to avail of loans at low-interest rates.

Also read: Advantages of Small Loans

Overall employment details

You can also leverage your current employment, past employment history and employer credentials to negotiate a good deal with your lender. You may be able to get a favourable deal if you work with a reputed company, multinational company or blue-chip company.

This is because not only are these employers indicative of reliability but they are believed to be less volatile in terms of job security as compared to a sole proprietor or a start-up. Even the income will be better if not at par with other employers, and there is no worry about late salaries or no salaries due to lack of funds. This translates into you having an on-time and stable income. The odds are in your favour if you are drawing a high salary.

Residential stability, your job profile, maintaining a healthy FOIR (Fixed Obligation to Income Ratio), employment tenure, etc., help improve your credit score. Loan seekers employed with PSUs, the state government, the central government or quasi-government organisations are viewed more favourably, reflecting the interest rates offered.

With a few checks in place and an impeccable financial track record, you are in a better position to be able to negotiate a great deal with the lender. These days, many financial tools are available online, such as the personal loan EMI calculator, the eligibility calculator etc., that give you clarity regarding the tenure, loan amount, interest rate and monthly outflow. Leverage this for better financial planning. So, what are you waiting for – if you want that Personal Loan, apply online today and get the best interest rates (post your checks in place).

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