How to Use Personal Loan Interest Rates to Choose the Best Lender

Globally, the desire to own better products has grown along with the rising standard of living. Despite budget constraints, quality is one aspect no one wants to compromise with. And with competitive personal loan interest rates offered by institutions, people readily turn to them for financial needs. Further, influential advertising might tempt you to sign up with little introspection.

But one aspect that you must consider is the interest rate applied to the principal amount. With several instant personal loan facilitators, deciding the best one can become tiring. One needs a straightforward, thorough guide in choosing lenders and negotiating interest rates.

Understanding Personal Interest Rate

Say you require a sum of INR 10000 (principal), which you borrow from a lender. Through mutual agreement, you pay them INR 10500 in 5 months.

In this scenario, you pay the lender an interest of INR 500. Using the basic simple interest formula, that is, I(simple interest) = P(principal) x R(interest rate) x T(Time in years), we can find out the interest rate.

R = I/(TxP) = (500/10000) x (12/5)

This comes to about 0.12, or a 12% interest rate.

While loan lenders might use variations, this formula is a great way to understand personal loan interest . The next step is deciding on a loan lender that works best for you.

The Road to Choosing a Loan Lender

Refrain from letting fancy advertising impact your decision while selecting a lender. Since taking a loan can significantly affect your financial stability in the long run, you must consider a few factors before opting for a lender.

• What's the rate: Personal loan interest rates are a must-check before selecting a lender.
• Check the credibility: Look for customer reviews, negative feedback, and the lender's authenticity.
• Seek flexible options: Credible lenders often offer flexibility in repayment options and payment rescheduling.
• Read through the agreement: Check the terms and conditions and highlight areas you might have to discuss with someone who understands legal terms.
• Processing Time: You might want to look for instant loan options if you require money urgently.
• Processing Charge: Look out for hidden or processing charges, if any.
• Negotiation options: Check if the lender is flexible enough to present an offer that is in the best interest of both parties.

Once you select your perfect loan lender, consider negotiating to get an ideal personal loan interest rate.

How Can You Ensure a Perfect Personal Interest Rate?

While all bank personal loan interest rates are generally lesser than non-banking financial organisations, the following steps can help you get the best deal.

• Maintaining a decent credit score: A lesser credit score might attract higher interest or make you ineligible for loan availing.
• Utilise your professional details: The interest rate provided would be low if you work for a reputed company or are paid well.
• Research the market: Knowing prevailing interest rates can help you negotiate better deals.
• Lookout for offers: Lenders are known to attract customers on special occasions by lowering personal loan interest.
• Verify the interest calculation methods: While the offered EMI might look low, chances are you may end up paying an additional amount.

Conclusion

A personal loan, sometimes necessary, is also an impulsive decision sometimes. But, in any case, factor in personal loan interest rates , vendor credibility, flexibility and terms and conditions before you choose one.

And if you are looking for a way to simplify the process, Fi Money is here to help. With the best interest rates and a transparent processing mechanism, you can avail of up to ₹ 5,00,000 without hassles.

Now the best part, you can do all of it in just about the same time you take to set up a social media account!

Frequently Asked Questions

1. How do I choose a loan lender?

While choosing a loan lender, you must check for interest rate, processing time, offered amount, and hidden charges. It is also best for you to check lenders' authenticity based on prior customer experiences and service.

2. How do I choose a personal loan?

Here are 7 factors that can help you choose a personal loan:

1. The loan amount & EMIs- how much do you wish to borrow and how will you be able to pay it off
2. The loan tenure - how long are you willing to keep paying the EMIs associated with the said loan
3. The lender - selecting a lender maybe overwhelming given that almost all financial institutions in the country offer personal loans, it all boils down to due diligence & trust
4. Your credit score - it becomes crucial for you to check your credit score which will in turn determine your creditworthiness and the kind/amount of loan you will be able to secure
5. The Interest rates - probably the factor that contributes most to this decision making is interest rates - while going for the lowest one makes sense, considering how they are calculated is also crucial
6. The foreclosure & prepayment charges - this is important to note as most financial institutions charge anywhere between 2%-5% of the balance amount as a foreclosure or early closure charge
7. Your existing liabilities/debt - consider your existing liabilities or debts before taking a personal loan, this helps in realigning your financial future based on your earnings

3. How to negotiate a better interest rate on a personal loan?

Before negotiating interest rates, ensure you know the prevailing rates in the market, and look for special offers. Moreover, maintaining a good credit score, timely repayment history, and cordial relations with the lender can help you obtain the best interest rates.

4. What should you compare when selecting loans?

When selecting a personal loan, some of the factors to consider and compare are interest rates, processing times, tenure, foreclosure/prepayment fees and documents required.