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Is the Rate of Interest on Your Personal Loan Negotiable - Know Here!
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Personal loans serve a variety of needs. You can use it for your child’s higher education or your dream holiday. You can also use it for funding your business expansion, home renovation or consolidation of debts. Moreover, it is easy and convenient to avail due to the online interface and simple application process.
However, you must know about its various aspects and carefully choose a personal loan that is affordable for you. The loan interest rates are crucial in determining your EMI and overall repayment amount. You might know that the lender decides your interest rates based on your financial profile. However, did you know that you can negotiate your personal loan interest rates? Yes, you heard it right. You can negotiate your loan interest rates from the lender and adjust your EMI. Read on to find out how.
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It is always better to research various lenders and then choose the best loan offer. However, sometimes, sticking to your existing lender can help you get lower interest rates. As you have bank accounts with them, they are aware of your financial profile and have experience of your trustworthiness. Moreover, if you have not defaulted in the past, you can leverage your good relationship for interest rate negotiations.
Your credit score is a key contributing factor that can help you in negotiating the rate of interest. A high credit score equals creditworthiness and reliability. So, with a good credit score, you can convince the lender of your repayment capacity and ask them to give you a lower interest rate. You must have a credit score of at least 750 for personal loans.
You must maintain a high credit score before you apply for personal loan. You can do so by maintaining a credit utilisation ratio below 30% and regularly keeping a check on your credit report. Moreover, you must also maintain a healthy credit mix of unsecured and secured loans.
You will not be in a position to negotiate with the lender if there are negative remarks on your financial profile. You must ensure that you have not missed any EMIs or credit card dues earlier. It would be best to clear off all your dues and maintain a low debt to income ratio.
If you are good at negotiating, you can convince the lender to reduce the loan interest rates. However, you must be aware of its various intricacies and aspects. For example, you must know about the interest calculation method used by the lender as it can affect the overall outstanding amount. Similarly, you must also know the factors, which the lender considers while determining your interest rates. It would be best to study about the loan before applying.
You can get lower personal loan interest rate if you negotiate with the lender based on your credit score and financial profile. Moreover, you can also leverage your job profile and financial stability to assure them of your repayment capacity. However, you must ensure that you repay the loan with discipline and maintain credibility so that you can enjoy the lower interest rates throughout the tenure. In case of negotiating, keep in mind that it increases timelines of disbursal and you may miss out on any special offers such as instant 3 second disbursal, no documentation, etc.
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