Personal loan, the unsecured form of credit, can help to:
- Plan and fund a vacation
- Sponsor education
- Cover the cost of a wedding
- Renovate your home
- Consolidate debt
With numerous lenders offering competitive personal loan interest rates, getting an affordable loan is easy. Read on to learn how to get one that can help you minimize the overall borrowing costs.
Compare the Interest Rates
Interest rates are an essential component for any loan, whether a personal loan, home loan, or any other form of credit. This is because interest rates decide your overall borrowing costs.
Lower personal loan interest rates will get you a more affordable loan, so comparing multiple lenders before applying for a loan is essential. With the advancements in the fintech sector, you can quickly check rates offered by various lenders online.
Simply visit the lender’s website and get the required information. Generally, the interest rates start at 10%, depending on your credit score, loan amount, duration of the loan, and much more. Hence, meeting the required eligibility criteria is essential to get a loan on affordable terms.
Read the Loan Terms Carefully
When you apply for a personal loan, lenders provide you with a loan agreement once you get the loan approval. This document contains all the essential details of your loan.
The loan agreement contains the following information:
- Personal loan interest rate offered by the bank or NBFC
- Repayment tenure
- Total EMI amount and due date
- Total repayment amount
- Mode of repayment
- Any additional rates and charges
You must check and compare these details across lenders before signing the agreement to get an affordable offer on your loan. If required, you can negotiate the terms with your lender based on your eligibility and credibility as a borrower.
Many lenders are flexible on charges, such as processing fees and interest rates. However, this depends on your relationship with the lender. That said, it is always important to read the costs carefully to avoid any unexpected variation in the repayment amount.
Apply with a Reputed Lender
Nowadays, you can easily find lenders online offering competitive personal loan interest rates. But you need to exercise caution when availing a loan. So, make sure to check the reputation of the bank or NBFC in the market before applying.
All reputable lenders will mention their fees and other loan processing charges on their websites, ensuring transparency. On the other hand, with a less-reputable lender, there may be hidden or additional charges on your loan which aren’t mentioned upfront.
Plan Your Loan Repayment
Planning your repayment includes calculating your EMI amount well in advance based on the tenure and applicable interest rate. You can use a personal loan EMI calculator to calculate your repayment terms before you apply for credit.
Using an EMI calculator is easy, as it gives an approximate calculation to help you plan repayment better. To use an EMI calculator, all you need to do is input your loan amount, the interest rate, and the tenure.
The tool will calculate your monthly installments and the total interest you must pay on the principal amount. You can further increase or decrease the tenure, sanction, or rate values to find a suitable EMI amount that fits your budget.
Consider Additional Pointers
In addition to interest rates, banks and NBFCs levy other charges on a personal loan. Here are some additional charges that may affect personal loan costs.
- Processing Fee: This is a nominal charge varying approximately between 0.5% and 4%, which covers the cost of processing your loan application.
- EMI Bounce Charge: This penalty applies when your EMI cheque bounces due to insufficient balance.
- Late Payment Fee: This fee applies if you pay the EMI after the due date.
- Balance Transfer: This applies if you wish to transfer your outstanding amount to other lenders at a lower interest rate. You can do so by paying the balance transfer fees.
- Foreclosure Charges: This charge is applicable if you wish to close your loan before the tenure.
Opt for a Shorter Tenure
You can make your personal loan more affordable in many ways, even when a higher interest rate is charged on the principal amount. One way to get a more affordable loan is to opt for a shorter tenure.
With a shorter tenure, you may have to pay a higher EMI, but in the long run, the interest outgo of your loan will reduce.
For example, assume that you have availed a personal loan of ₹1 Lakh at an interest rate of 11%.
For a tenure of 2 years, your EMI will be ₹4,661, and your total payable amount will be ₹1,11,859. On the other hand, if you take a loan for 1 year, your EMI will be ₹8,838. However, your total payable will be reduced to ₹1,06,058.
The differences in the total payable amount of both options clearly emphasize the significance of opting for a shorter loan tenure. Thus, paying a higher EMI is a smart decision to have an affordable personal loan. Remember to check your existing financial obligations before opting for a shorter tenure.
Borrow the Required Funds
To make your loan affordable, consider borrowing only as much as you need. Since you have to pay the interest on the loan amount, it is important to avoid borrowing extra. For that, you need to assess your requirements and then choose a feasible loan amount.
You can get an affordable personal loan from any lender by considering these parameters carefully. Thankfully, the digital application process lets you save time and money by applying on the lender’s website right from the comfort of your home.
Online personal loan application is faster and more convenient, and you can get instant approval with a quick loan transfer to your bank account. However, ensure you meet the lender’s requirements before applying for a loan. This avoids unnecessary loan rejections.
Read More: Must Follow Rules When Taking a Personal Loan Online
