A negotiation consists of two parties hoping to obtain middle ground on an issue. He who has the skill of a good negotiation goes a long way in life. Even in the case of a personal loan, it is quite essential that you know how to negotiate for the lowest interest rates. Here are a few tips that might help you in doing the same-
Interest rates are higher if a loan is not secured. Because if the borrower is unable to repay the loan, the bank has no way of recovering it. This is the reason why interest rates were higher when personal loans were introduced. To obtain lower interest rates on personal loans, you can offer collateral to the bank. This way, the risk factor involved in your loan application is considerably reduced and the interest rates will be lower.
Your credit score is one of the most important aspects of your financial health. This is how lenders understand if you will be able to repay the loan they are offering you. IN simple terms, it determines your creditworthiness. If you improve your credit score, you can leverage that to get lower interest rates.
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It is true that financial institutions like banks and NBFCs consider your credit score for determining the interest rate on your loan. But they also consider a few other factors for the same. One of these factors is the debt to income ratio. If you increase your income, your debt to income ratio will reduce automatically. This way, you can negotiate for better interest rates from the bank. It will also help you get the best credit cards in the market.
This is one is a hack. It may or may not work. It is based on the principle that banks are also like any other company. Like any other company, there are salespeople at banks also. And also like other companies, these salespeople have targets for a certain amount of loan disbursal in a month. If you shop for a personal loan during this duration, you can get the lowest rates than any other time of the month.
So there you go, we hope these tips help you in negotiating the best interest rates for your personal loans. In case you have any finance related queries, do let us know in the comment section below. Until next time!
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