Personal loans are an ideal financial instrument to tackle financial needs such as vacation, dream wedding, renovations in the house or a medical emergency. Personal loans are available with no predetermined end use, are collateral free and are disbursed quickly with minimum documentation. The personal loan interest rate play an important role in determining the EMIs and total repayment amount. The interest rate of your personal loan depends on your financial report and credit score. You can negotiate your interest rate to adjust your EMI to make it more manageable.
Ways To Negotiate
Lowering the interest rate can reduce the EMI amount. Following are some tips to secure a reduced interest rate:
• Maintain A Good Credit Score -
A good credit score increases your chances of availing a personal loan at a lower rate of interest. A credit score of 750 or above is considered a good credit score. A good credit score implies that you have a good financial health and your high credit worthiness. It reflects that you tend to repay your credits and loan timely and in full amount. To maintain a good credit score you must repay your credit card bills and EMIs timely, maintain a credit utilization ratio within 30% limit, avoid multiple credit inquiries within a short span of time and maintain a balanced mix of both secured and unsecured loans.
• Maintain A Good Repayment Track Record -
You must have no negative remark on your financial report. To ensure this, you must pay your EMIs and credit card bills before their due date and in full amount.
• Compare Interest Rates Offered By Different Lenders -
In case you meet eligibility criteria of various banks, then it is advisable to compare the personal loan offers and deals offered by the banks. In such a case, you will be able to get the best deal.
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• Look Out For Special Offers -
Banks do come out with special offers especially during the festive time. In such schemes they offer lower rate of interest. This will help reduce the overall amount of repayment of loan.
• Approach Your Existing Bank -
Since your existing bank are aware of your financial accounts and have trust on your credit worthiness, they may agree to negotiate on the rate of interest.
• Check The Method Of Interest Calculation -
You must check the method used for interest calculation. The method used can result in the difference in the overall interest amount paid by you at the end of the loan tenure. There are two ways to calculate. In flat rate method the interest is calculated on the entire principal amount throughout the loan tenure. With reducing interest rate method, the interest is calculated on the outstanding principal amount.
Conclusion
You can avail lower rate of interest if you are able to negotiate depending on your credit score, repayment track record and method of interest calculation. Lower rate of interest will lower the overall repayment amount.
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