Being offered a low rate of interest on your loan application is something that you’d certainly want, wouldn’t you? If there are two lenders, one offering you an interest rate of 12% p.a., and another offering you a rate of 25% p.a., which one would you choose? You’d certainly go ahead with the lender offering you a lower rate, isn’t that right? Well, as for instant loans in India, there are many lenders offering these loans at varied interest rates. What you should know is that the interest rate on your application will depend on a spate of parameters. It is often the case that applicants are offered different rates of interest on their applications. This is because lenders use risk-based pricing, a model to evaluate applicants and subsequently determine their cost of borrowing. Risk-based pricing is a popular model that lenders around the world employ to fix the cost of borrowing for different loan applicants – this is applicable for both secured and unsecured credit. In this article, we look at how it is possible to get a lower rate of interest on your loan application. This doesn’t happen immediately and takes time. In case you don’t have a credit history (first time borrower), then you’re bound to be offered a comparatively higher interest rate (than somebody who has a credit history). But in this case, approaching the right lender helps a great deal. Let’s look at some tips to get the best rate of interest on your instant personal loan application.
Getting the best interest rate on your instant personal loan application – here is what you should know
Keep your credit score high: One of the fundamental requirements to get the best market rate for your loan is to keep your credit score high. Your credit score is perhaps the most important parameter that directly influences the outcome of your loan application (also of course the interest rate). A low credit score will not result in you being offered a relatively higher rate of interest, but can also result in your application being rejected. Lenders look at the credit score very closely, and interest rates on applications are almost directly dependent on the individual’s credit score. So the first step to getting a lower rate of interest on your loan is to keep your credit score high.
Watch your repayments: Your repayment history is another very important parameter that determines the rate of interest you’re offered. Your repayment history is basically a documented record of all monthly repayments you’ve made on past loans. Any instance of default can severely dent your chances of being offered a good interest rate while also increasing the probability of rejection. Note that late payments also have a negative impact, so avoid paying late and make sure you’re able to arrange your repayments on time.
Negotiate: If you have an impressive credit history and an above average credit score, you should go ahead and negotiate with your lender in case you’re being offered an unfairly high rate of interest. This often works. But take note of the fact that you’d often find certain lenders claiming to offer the lowest rates in the market, but for all you’d have known, the advertised rates are the flat rates of interest which do not reflect the real cost of borrowing.