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One of the most effective borrowing options is the personal loan during financial emergencies. Being an unsecured variant, personal loans are comparatively easy to avail of. 

Nevertheless, potential borrowers must stay aware of the factors that influence interest rates when applying for a personal loan. Here are the 4 factors that will allow borrowers to avail the lowest interest rate on a personal loan.

Consider these 4 factors to avail of the lowest interest rate on a personal loan

Usually, before sanctioning a personal loan, lenders consider multiple factors, such as the borrower’s repayment capacity, loan amount, employment status, etc. Interest rate is a crucial factor to consider as it is usually higher than other loan variants. Hence, choosing the lowest interest rate personal loan is the best way to manage urgent financial requirements.

To grab the best offer and reap its benefits, individuals need to consider the following factors to ensure the best personal loan application without any hassle-

• Maintain creditworthiness

Usually, lenders set interest rates primarily based on the cost of funds and credit risk assessment of the loan applicants. Besides, lenders have started considering credit scores while settling interest rates on personal loans. Therefore, if individuals possess a higher credit score, they can avail better deals on personal loans. Usually, lenders decide the loan amount, repayment terms and interest rate, depending on the credit score.

Therefore, potential borrowers need to know about the ideal CIBIL score for a personal loan to enhance their chances of bagging the best personal loan deal. However, individuals can maintain a good credit score by practising certain financial habits, such as timely repayment of credit card bills, paying EMIs within the due date, avoiding multiple credit card applications within a short period, etc.

• Research and compare lenders

This is one of the effective ways to avail of the right personal loan deal. If individuals invest substantial time in research, they will find an ideal personal loan. This comparison can be conducted easily. Individuals just need to find a loan with a reasonable interest rate and compare its benefits and features. One can get discounts and offers when applying online during festivals.

One can check the eligibility, loan amount, and EMI by comparing the loans offered by different lenders. Here individuals can use a personal loan calculator available online to determine the amount they have to pay as EMI. This will further help them structure their repayments and manage finances accordingly.

• Maintain a lower debt-to-income ratio

Individuals can avail the lowest interest rate personal loan by minimising their debt-to-income ratio. Lenders check a borrower’s financial background before approving loan applications. They carefully assess the applicant’s repayment history and debt-to-income ratio. Borrowers with various financial liabilities and unstable disposable income are considered unreliable. 

Hence, it is essential to maintain a lower debt-to-income ratio for improving credibility. With higher credibility, one can negotiate with the lender for levying competitive interest rates against credit borrowing.

• Qualify based on professional credentials

Individuals must work in a reputed public organisation with a stable monthly income when applying for a personal loan for salaried. This makes the applicant a reliable borrower in the lender’s eye. Borrowers with a higher salary and stable employment status can negotiate with lenders for better interest rates. Working in a reputed company allows a borrower to avail of a personal loan at a lower interest rate since the lender has an assurance that they will have the financial means to make repayments diligently.

Individuals can ensure affordable interest rates and use a personal loan to meet their financial needs by keeping these factors in mind.

Apart from these, individuals must check the interest calculation method. To obtain the best personal loan interest rate, individuals need to check the interest calculation method to determine the interest amount they need to pay against the credit.  

Besides, existing borrowers can also avail of pre-approved offers extended by leading financial institutions like Bajaj Finserv on an expansive suite of financial products, such as business loans, personal loans, credit cards, etc. 

Availing of these offers ensures minimal documentation and accelerated loan application. Customers can check their pre-approved offer by mentioning their name and contact information.

Now that borrowers are aware of the factors that need to be considered for ensuring the lowest personal loan interest rate, they can conveniently apply for it online and meet their financial requirements with ease.