How to Get Personal Loan with Low Interest Rate

Are you wondering how your colleague managed to secure a personal loan with incredibly low rates while you are spending a fortune in paying the interest? Well, the secret here not only lies in a good credit score (though it helps); it is also about the right financial habits and strategies to tilt the chances in your favour.

Many people still hesitate to take out personal loans from banks, NBFCs, or other financial institutions due to high interest rates. But the good news is that with a strategic approach and planning, you can convince lenders to sanction loans at better interest rates. In this blog, you will learn about several factors on how to get personal loan with low interest rate.

Check Out the Roadmap to Low Interest Personal Loan

Banks won’t always tell you how to qualify for their best loan rates, but we will. Here are the best-kept secrets to avail low interest personal loans:

Understand the Factors That Affect Interest Rates

Before you check what is the interest rate on a personal loan, remember that the interest rates offered by financial institutions are not carved in stone. They are determined by a few aspects that help lenders evaluate the risk and creditworthiness of the borrower. It includes:

• Income Stability: Before starting the process of a personal loan, every lender wants to ensure your capability of repaying the loan. Therefore, income stability is essential. A steady job and income provide confirmation that the borrower will be able to pay equated monthly installments (EMIs) smoothly. This helps qualify for a personal loan minimum interest rate.
• Credit Score: This is the most important factor for lenders when determining the approval and interest rate of the loan. The higher the score, the higher the chances for the cheapest personal loan interest rate. A score of 750 and above highlights that the borrower is less likely to default on payments.
• Debt-to-Income Ratio: This is a method to calculate how much of your monthly income is spent on monthly debt payments. A lower debt-to-income ratio conveys your ability to manage your finances well, boosting your chances of qualifying for the lowest interest rate personal loan.
• Loan Amount and Tenure: Do you know the loan amount and repayment tenure also impact the interest rate? Yes, it is true. Usually, large amounts have higher interest rates, but short-tenure loans can be availed at low interest rates. However, it implies higher monthly payments.

Improve Credit Score Before Filling the Application

The credit score is the financial reputation of the borrower that can make or break the loan offer. It is the first thing that a lender verifies before proceeding with the loan application. Below are a few ways to help you enhance it.

• Check Your Credit Report: Rarely, but it is possible that your credit report may have incorrect or false information that lowered your credit score. Download and review the report to correct any inaccuracies.
• Minimise Credit Utilisation: Own a credit card? If yes, then ensure that its usage is below 30% of your total credit limit. Wondering why? It indicates that you are not overly dependent on credit, thus improving your credit score for low personal loan interest rate all bank.
• Pay Bills on Time: One thing that can influence your credit score in a bad way is default on payments. Pay your bills on time to tell the lender that you have responsible financial behaviour, enhancing your credit score over time.
• No Multiple Loan Applications: If you apply for several loan applications in a short span of time, lenders will assume that you are under financial stress. This can impact your credit score and your chances of getting low interest personal loans.

Compare Low Interest Personal Loans: Do Not Settle for the First Offer

Each lender offers different interest rates on personal loans; therefore, it is vital to look around before deciding on one. Still, wondering how to get personal loan with low interest rate? Follow these tips for effective comparison.

• Banks vs. NBFCs vs. Online Lenders: It is a well-known fact that banks offer personal loans at low interest rates. Alternatively, NBFCs and other financial institutions provide ease of eligibility criteria and loan terms. Ensure to review all the products for the best deal.
• Check for Promotional Offers: All financial institutions, including banks, run promotional offers during festive periods or year-end. These offers are equipped with low personal loan interest rates or low processing fees, so keep looking for them to save some money.

Say Yes to Secured Low Interest Personal Loans

Do you have gold, property, or fixed deposits? Pledge them as collateral while applying for a personal loan to get low interest rates. This type of loan is known as a secured loan, where the lender can use the collateral as a backup in case of default payments. The good part? Secured personal loans are available at low interest rates as the risk on the lender due to collateral becomes low.

While the advantage of low interest personal loan rates is tempting, the fear of losing the collateral is undeniable. Therefore, analyze your repaying capabilities before pledging any valuable asset.

Maintain a Good Relationship with Your Bank

If you are an existing bank customer and have retained a good relationship, then interest rates can work in your favour. Here are a few strategies on how to get a low interest personal loan with existing connections:

• Pre-Approved Loan Offers: These loan offers are commonly available to people who are long-term customers of their respective banks. Available with the cheapest personal loan interest rate, they are also favoured for quick processing and disbursals.
• Loyalty Discounts: Because of the maintained relationship, banks offer a personal loan with low interest rate to long-standing customers.
• Use Salary Accounts for Loan Applications: Having a salary account in the bank you want to take the loan from will increase the likelihood of getting low interest rates.

Opt for a Shorter Loan Tenure

When it comes to personal loans, tenure is a lot more than just a number. It also decides how much interest you will pay. However, a longer tenure is attractive as it comes with a lower amount of EMIs, but it makes you shed more money. Thinking about how loan tenure impacts the interest rates? Well, the longer you take to repay, the more interest your loan accrues.

The solution? Go for shorter tenures to cut down on interest rates. For example, suppose a bank offers you a personal loan of ₹5 lakh at 10% interest. For 3 years, the interest will be ₹82,000, and for 5 years, the interest is ₹1.38 lakh. That’s quite a difference of ₹56,000 in choosing a longer loan tenure.

Choosing a shorter tenure makes you pay higher EMIs, but it helps you save in the long run. If your budget allows, it’s one of the smartest moves to secure a personal loan with low interest rate and become debt-free faster.

Consider a Balance Transfer

Did you take a personal loan two years ago at a higher interest rate? Do not worry - a personal loan balance transfer can lower your EMIs and increase your savings. It means that you can easily transfer your loan to another lender who is offering the lowest interest rate personal loan.

Now, the million-dollar question - when should I consider balance transfer? All offers are not worth a switch, but if you get a rate of 2% lower, then it is a win-win.

For instance, if your current interest rate is 13% and another bank is offering 10%, you can definitely switch. Also, check for the processing fees and other costs associated with the balance transfer to calculate your costs.

Summing Up

Securing a personal loan with low interest rate is all about the right strategies and approach. Begin with improving your credit score, evaluating the best deals, exploring secured loans, and much more. With a little research and skilful negotiation, you can put less strain on your wallet. Remember, smart borrowing and solid planning are good for your loan as well as your financial health. So, follow them and make your financial journey smoother and more affordable with the best low interest personal loans. Wondering where and how to apply? Your desired low interest rate is just a few clicks away. Don’t miss out on this incredible opportunity. Apply today with My Mudra

Also read: Why is Applying for a Personal Loan a Good Choice in 2025?