How to reduce Loan Interest Rate?
Personal loans are generally unsecured loans and they have a higher rate of interest as compared to other types of loans. Personal loans have gained popularity in the recent past since these loans are easy to avail of and can be used during financial emergencies. But the question arises of how to reduce personal loan interest rate. Availing a personal loan can be heavy on your pocket due to the high rate of interest and knowing how to reduce interest on personal loan can help in getting a loan with a low rate of interest which will, in turn, reduce the burden on your pocket.
Let’s decipher the ways to reduce the personal loan burden.
Maintain a good credit score
Maintaining a good credit score can help you secure a personal loan at a competitive interest rate thereby decreasing the amount of EMI’s and the total interest payout. This is an effective way of how to reduce personal loan interest rate. You can improve your credit score gradually by repaying your loans and dues. Try to maintain a credit score above 750, since it will help in getting a good deal. You should continuously monitor that the EMIs of the loans availed as the primary borrower, guarantor, or co-signer is timely paid since this affects your credit score.
Personal loans are generally unsecured loans and they have a higher rate of interest as compared to other types of loans. Personal loans have gained popularity in the recent past since these loans are easy to avail of and can be used during financial emergencies. But the question arises of how to reduce personal loan interest rate. Availing a personal loan can be heavy on your pocket due to the high rate of interest and knowing how to reduce interest on personal loan can help in getting a loan with a low rate of interest which will, in turn, reduce the burden on your pocket.
Let’s decipher the ways to reduce the personal loan burden.
Maintain a good credit score
Maintaining a good credit score can help you secure a personal loan at a competitive interest rate thereby decreasing the amount of EMI’s and the total interest payout. This is an effective way of how to reduce personal loan interest rate. You can improve your credit score gradually by repaying your loans and dues. Try to maintain a credit score above 750, since it will help in getting a good deal. You should continuously monitor that the EMIs of the loans availed as the primary borrower, guarantor, or co-signer is timely paid since this affects your credit score.
Request the Lender to Reduce the Interest Rate
If you have a good credit score and a strong repayment history you can always ask your lender to reduce the rate of interest. This is one of the ways how to reduce interest rate on existing personal loan.
Opt for balance transfer if the existing lender refuses to reduce the interest rates
If your existing lender refuses to decrease the interest rates, start searching for the lender who can offer you low-interest rates on your existing loan. This is one of the methods of how to reduce personal loan interest rate.
Prepay your loans
Before availing of the personal loan you should properly plan how you’ll repay the loan and proper planning can help in easily paying the EMIs. If you generate some extra income you should always pay off your loans as it will save on the internet cost and will reduce your monthly payment burden.
Liquidate your low yielding investments
You can pay off your loan by liquidating low yielding investments such as recurring deposits and fixed deposits since the rate of interest you receive from these investments is much lower than the rate of interest you’re paying for your personal loan. You can take something out of your investments to pay a certain amount of the loan to reduce the outstanding balance and the interest outgo and this will help you in reducing the tenure of repaying the loan. This is one of the ways of how to reduce personal loan tenure.
Secured Loans to Pay Off Personal Loan
How to reduce personal loan interest rate is one of the questions which keeps running into our minds when we have availed of a personal loan during a financial emergency. But you can repay your personal loan by availing of a secured loan such as a gold loan or loan on your investments. Since these loans have a low rate of interest as compared to the personal loan and will reduce your monthly EMI which will reduce the burden on your pocket.
Choose the Step-Down EMI option.
There are many banks and financial institutions which offer loans on a step-down method wherein the borrower has to pay more EMI at the beginning of the tenure and with the subsequent payment of the EMIs the amount of EMI to be paid decreases as the principal amount decreases after payment of EMIs. The people who are about to retire can opt for this option, so this answered the question of how to reduce the EMI of personal loan at the end of the tenure.