Personal Loans can be taken in times of urgent need – a wedding, a vacation, or tuition fee for an academic course. However, Personal Loans have a higher interest rate than other loans, such as home loans and student loans. For example, Personal Loan interest rates in India range from approx.. 10% to 24% per annum. Partially, this is because Personal Loans do not ask for collateral. A Personal Loan can be taken for various reasons with significantly less restriction.
Tackling high Personal Loan interest rates in India
Here are some ways how you can tackle high Personal Loan interest rates in India:
– Prepayment of loans
In case you already have one or more than one outstanding loans on you, the smart approach is to clear up some of them as early as possible. This reduces the number of instalments you will be paying per month. Since the Personal Loan interest calculator for any bank charges a high-interest rate, it is better to get done with most or all of your pending loans.
– Repay based on interest rate
It is advised to make a list of all the loans you have. While curating this list, make sure it is done in descending order of interest rate. Then, start by repaying the ones with the highest interest rates on a priority basis. This will reduce the amount of money to be repaid in the form of EMIs.
– Maintenance of good credit score
Banks screen loan applicants of all kinds with the help of credit scores, which get affected based on how many past repayments have been done in time or whether they have been missed. The ones with a higher credit score are likely to be charged with lower interest rates.
– Negotiation
In the case of regular customers of the bank who enjoy a cordial relationship with the lender, they can also negotiate for lower interest rates. Therefore, your banker would likely consider charging you a lower rate of interest.
– Use extra income or bonuses.
If you receive any extra income from a side business or part-time job, try to utilize that surplus to repay the loans as fast as possible so that the interest rates get lower.
– Compare the rates imposed by different financial institutions.
Before applying for a Personal Loan, make sure you have researched and compared different banks’ and lenders’ current interest rates. Almost all leading financial institutions provide a Personal Loan interest calculator on their website. It is handy to use them and get an idea of what your EMIs are likely to be.
– Repay in a lump sum through a top-up loan
A top-up loan can be taken by anyone who already has a home loan through a lender. This amount can be used to repay most or all Personal Loans, thereby reducing interest costs. However, a good CIBIL or credit score is needed to avail of this.
– Cut down on monthly expenditure.
One of the most obvious yet beneficial pieces of advice is to reduce monthly expenses and focus on repaying the Personal Loan as fast as possible.
– Transfer the loan balance
If the interest rate is too high for you, then you can switch to a low-interest rate loan. However, this too depends on your credit score. A clean track record makes it very easy to avail of this option.
– Consolidate all debts
If you have multiple loans, it is beneficial to take a single loan by consolidating all loans into one with a lesser interest rate. It is better to pay a lower interest rate on a single loan than to pay for several loans with a higher interest rate.
Despite high Personal Loan interest rates in India, many leading banks offer discounts for customers with a high CIBIL or credit score. Moreover, there are other ways through which you can take care of the same. Starting from 10 per cent or more, Personal Loan interest rates in India reach up to 24 per cent, depending on the bank or other features of the loan.