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7 Things Can Be Useful To Reduce Personal Loan Interest Rates

A personal loan is meant to meet the short-term financial needs of the borrower. They are meant for the self-employed or salaried professionals who have a continuous source of income. Most of the money lenders offer different interest rates on personal loans, but there are other things to be considered in addition to these published rates.

Here we are going to discuss the factors that determine your ability to get the lowest interest rate on personal loan. Most of the people are unaware of these factors which help to avail best possible personal loan interest rates.
read this article to know.

Things Useful To Reduce Personal Loan Interest Rates:

1. Your credit history
Moneylenders are really interested to know your credit history and your CIBIL score. With the help of your CIBIL score, the moneylender can evaluate your creditworthiness. You can avail the lowest rate of interest if you have a good credit score which is 750 or above. You can even get the best possible rate of interest if you have a higher income and the right amount of loan at the same time.

2. Tenure of the loan
Tenure plays an essential part in securing the best possible rate of interest on personal loans. If you choose the more extended repayment period, you might have to pay higher interest rates, and if you choose a shorter tenure, you are about to pay a lower rate of interest. You can check out your EMIs and the repayment tenure with the help of a personal loan EMI calculator.

3. Get a co-signer
Some of the money lenders who offer personal loans accept the co-signers during your application. It would help if you introduced a co-signer who has an excellent credit history and a reliable income which can help improve your chances of getting a pre-approved loan or a loan at lower interest rates. In this case, the person is guaranteeing your loan personally. The loan will also reflect the credit report of your co-signer, which might potentially affect his/her credit history and ability to borrow money in future.

4. Sign up for an autopay discount
Some money lenders offer lucrative discounts if you sign up for automatic payments. The rationale behind this is that if you are on autopay, you are more likely to make your EMIs on time. Although the discount is small, generally around 0.25% of your loan amount, you can save a lot on your interest rates. While signing up for an autopay discount, you simply need to bear in mind that you have enough balance in your account each month to cover the automatic payment. If you don’t and not have the overdraft facility, the lender may charge you a penalty or a fee.

5. Use collateral
Most of us thought personal loans as unsecured loans, which means that they don’t require any collateral. But with some money lenders, you can secure your loan with a vehicle, gold, home or even cash in your account. Secured loans are considered as low risk because if you default, the lender can seize the collateral to satisfy the debt. Secured loans generally come with a lower rate of interest. But, secured loans may not be a good idea if you are not sure about your ability to repay the loan in full. Losing your car, home or savings, when you are already hurting can make things much worse.

6. Avoid fees
The annual interest rates of a personal loan not only include the interest rate, but it also covers its fees. The main charge that you need to avoid is the origination fee. Depending on the moneylender, it can range from 1% to 8% of the loan amount. It is generally deducted before you receive your loan amount. Some lenders don’t charge the origination fee if you are qualified for the personal loan online approval.

7. Work with a credit union
Unlike money lenders, credit unions are nonprofit organizations which are owned by their members. As a result, these institutes generally return profits to their members in the form of a lower rate of interest and fees and higher rates on deposits. The only disadvantage about this is that such unions require you to join before you can take out a loan. To have eligibility to join a credit union, you generally need to live or work in their specific area and fulfil certain parameters.

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