- Do you know how to reduce your personal loan outgo and get the required amount to fulfill your needs?
- Read this post that tells how you can get the best interest rate to reduce your repayment burden
The best thing about a personal loan is its ability to meet your needs instantly. Doesn’t matter whether you require funds for marriage, travel, education or medical emergency, you can get it quickly without having to submit any security. The fast accessibility and wide-ranging utilities make it one of the best loan options for people. That said, how can you ensure a cost-friendly personal loan journey? At the same time, you can’t compromise on your needs. So, what is the best option that serves these purposes with a personal loan? There may not be a single thing that can make your loan the best one. So, you may need to consider more than one thing when applying for a personal loan. In this post, we will tell you all that and more in detail. Let’s read on!
What are the Options Should You Seek in a Personal Loan?
If you care about your money, you should look to sign a personal loan deal with the lender that gives you the best interest rate and asks you to pay less processing fees, etc. We will focus on each of these aspects and help you choose the best option.
Shop for the Best Interest Rate
As a personal loan comes to you without any collateral, the interest rate can be higher than loans that come with security. You should, therefore, look for lenders that offer you the least interest rate so that the Equated Monthly Installment (EMI) and overall interest outgo reduces. Not only do you increase the possibility of paying the EMI on time, but also boost your credit score by doing so. Let’s check out the personal loan interest rates of top lenders in India.
|Lenders||Interest Rates (In Per Annum)|
|HDFC Bank||10.75% - 14.50%|
|ICICI Bank||10.75% - 19.00%|
|State Bank of India (SBI)||11.00% - 14.00%|
|Kotak Mahindra Bank||10.99% Onwards|
|Bajaj Finserv||11.00% Onwards|
|YES BANK||11.05% - 20.25%|
|IDFC First Bank||10.50% - 25%|
|Fullerton India||11.99% Onwards|
|Axis Bank||10.49% - 21.00%|
Negotiate Interest Rates Based on Your Income & Credit Score
As personal loan interest rates depend greatly on your income and credit score, you get a chance to negotiate with the lender for a lower rate. If you are earning high and have been getting your salary on time, it might convince the lender to offer you the loan at a lower rate of interest. Plus, if your credit score is more than 750, you give yourself the best chance to grab the lowest rate from the lender. Some lenders offer interest rates based on the type of workplace. So, if you work in a top-notch firm, the interest rate can be substantially lower. Do consider all these factors when choosing the best interest rate.
Check the Processing Fee
Personal loans come with a one-time processing fee, which can either be a flat amount or a certain percentage (typically 1-2.50%) of the loan amount you apply for. The processing fee works differently in a personal loan compared to other loans. Here, you don’t need to pay the fee from your end, unlike other loans. It is rather debited from the loan amount. The sum so arrived is the one you will get in your bank account from the lender. However, the interest rate will be charged on the applied amount and not the amount you get. So, the lesser the processing fee, the more the loan amount you will get from the lender to fulfill your purposes.
Check How Much Does the Lender Charge on Prepayment
Saving interest on a personal loan should be your top agenda. You might not get the best personal loan interest rate but you can make it move your way by reducing the overall interest obligations. Yes, you can do so by using the prepayment facility. With this facility, you can pay the entire outstanding loan balance or a part of it before the original loan tenure. Save from your routine and liquidate financial instruments, which offer lower returns, to prepay the loan. But the lender charges on prepayment too. So, check how much the lender charges on the same. Normally, the lender charges around 2-4% plus applicable taxes on prepayment. The lesser the prepayment charges, the more you will save. Let’s take an example to check the effect of personal loan prepayment charges on your savings.
Example – Shyam and Akash apply for a 5-year personal loan of INR 8 lakh each at an interest rate of 13% per annum. Both prepay the loan fully after paying the EMI for 3 years without fail. While Shyam can prepay by paying 2% plus GST, Akash will need to pay 4% plus GST. Let’s check out below the difference in savings between the two.
|Interest Payable on INR 8 Lakh @13% Over 5 Years||INR 2,92,148||INR 2,92,148|
|Interest Paid So Far @13%||INR 2,38,162||INR 2,38,162|
|Outstanding Loan Balance||INR 3,82,872||INR 3,82,872|
|Prepayment Charges||INR 9,035.78||INR 18,071.59|
|Savings||INR 44,950.22 (2,92,148-2,38,162-9,035.78)||INR 35,914.41 (2,92,148-2,38,162-18,071.59)|
You could see how Shyam can save more with a lower prepayment charge. At the same time, you could find a few lenders charging nothing on prepayment. In that case, the savings will be even more.
Pre-approved Personal Loan Offers
It could also be one of the best options to have on a personal loan. As lenders like to offer personal loans to someone having a credit score of at least 700, you might feel whether you can get the same without any credit history. Yes, you can! A pre-approved personal loan is one of the ways by which you can get instant funds to meet your needs. This type of loan is given based on your savings or salary account relationship, as well as the credit card repayment track. But if you don’t have a credit history, a pre-approved personal loan will be based on either a savings or salary account relationship. You can get such a loan from the lender where you have an existing relationship. The best part is that you don’t even need to apply. All you need to do is give consent to the loan offer and the amount will be in your bank account. You could receive pre-approved loan offers on your email address or mobile number. Alternatively, you can call the 24×7 helpline number to know whether you are eligible for such a loan offer.