Dos and Don’ts that Influence the Interest Rate of your Personal Loan

A personal loan is a kind of unsecured loan in which the borrower is not required to put up any collateral. That’s why personal loans have higher interest rates than secured loans. The personal loan interest must be kept under control at all times so that the borrower isn't subsequently overwhelmed with repayment obligations. To reduce the interest rate charged, here are some things you may do and don’t.
What you should do

• Maintain a good credit score

Your credit score is based on how you've handled credit in the past, and it reflects your ability to repay debts. Lenders use your credit score to decide loan terms, amount, and interest rate. When it comes time to negotiate, having a higher score provides you with an advantage.

• Qualify your credentials

Lenders see you as a more reliable borrower if you have a high income and work for a well-known public or private organization. So take advantage of this to get a better interest rate. Loan rates might be cheaper since your company's outstanding reputation.

• Calculate the repayment values

By comparing quick loans from several lenders, one may determine eligibility, EMI amount, and loan amount. Personal loan EMI calculators are accessible online to get the amount after typing in one's data. It provides you with a good idea of how much you'll be paying each month.

What you shouldn’t do

• Over-borrowing

You must borrow just the amount necessary to satisfy your needs, and you must not borrow any more money. Over-borrowing may place an undue burden on your financial situation, making it harder for you to pay off your debts on the whole and schedule.

• Opting for a longer tenure

You may choose a longer-term if you want to pay lesser EMIs. However, it may just add to the financial load. You will pay a higher personal loan interest rate with a longer term. More minor loan terms allow you to save money on interest and reduce your total debt load.

• Don’t forget to read the fine print

Lenders may promise you quick approval and a considerable loan amount during your application. Don't be fooled by such assurances. Before joining, make sure you understand all the terms and conditions. Make the ideal loan decision with a company like Bajaj Finserv.

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Read Also: Apply for a Small Personal Loan & Calculate EMI