What’s should be your strategy for primary market in FY25?

Personal loan is a much-preferred option for many people who are in need of funds quickly and without much paperwork. Many banks disburse personal loan within a couple of hours. It is an unsecured loan for which one has to submit income-related documents such as payslips, ITRs and other documents except in the case of pre-approved loans. An application for a personal loan is easy to complete. Interest rates can vary widely — from 9.5% to 24% —depending on the amount, tenure and bank.

For personal loans, the interest rate is usually between 9% and 24% per year and is usually decided on factors such as monthly income, credit profile, payment history, job profile of the applicant, employer profile etc.

Suppose two persons have applied for a personal loan of Rs 3 lakh from a same bank. But depending on a few factors one is charged 10% interest rate and the other person might get 13.5%. If you want personal loan with low rate, you have to keep these things in mind.

1. Good credit score

Your credit score is the first and foremost determinant of a personal loan. This score will denote that how creditworthy you are. The better the credit score, the easier it will be for you to avail yourself of a loan at lower rates. The lenders decide the interest rate, loan amount and other terms related to the disbursement of the loan on the basis of credit score and loan repayment history of the person. So, maintain a high credit score.

2. Apply for a secured loan

Secured personal loans are backed by collaterals such as a savings account, certificate of deposit or vehicle or fixed deposit. They’re often easier to qualify for than unsecured personal loans because the lender has the right to keep your collateral if you’re unable to make your payments. Loans without collaterals entail a higher interest rate due to lack of security on the part of the lender. So, applying a personal loan backed by collateral will help you get at a lower rate.

3. Borrow from banks

Both NBFCs and banks provide personal loans. While banks are recognised for their lower interest rates, NBFCs offer money quickly. If you need money quickly and without any difficulty, NBFCs are a good solution. On the other hand, banks are often regarded as a paragon of reliability and offer more competitive rates than. So, first check with public sector banks.

4. Compare interest rates

Different lenders offer different interest rates for personal loans of different tenure. For instance, for a longer tenure, the interest rate will mostly be higher while for a shorter tenure, the rate is likely to be lower. If you need money for a short-term need and are confident that you will be able to repay the amount in a short time, seek a short-term loan. Usually, personal loan tenure ranges from one to seven years.

If you opt for a shorter loan period, you can save a good amount of money which you have to pay as interest for longer loan tenure.

5. Avoid multiple applications

Applying to multiple lenders for a personal loan will hurt your credit score and will bring down the chance of your getting the loan, let alone getting it at lower interest rate. Multiple credit inquiries are looked down upon by lenders as it is considered a sign of high credit risk, impacting the chances of getting loan approval or getting loan at low rates.

6. Good repayment record

If you have taken any loan earlier and paid it off in due time then your new loan application would be processed quickly and the interest rate would be comparatively low. So, try to pay your existing loan and even credit card dues in time, or before time. That will help you a lot for future loan application and also have a positive impact on interest rate.

Good relationship with a bank can also determine your personal loan interest rate and extent of loyalty to the lending bank.