Someone planning to buy the dream car that they always wanted? Or do they want to fund their international trip to some cool places? But, are a little bit short on cash in handy to spend the immediate expenses. Here, comes a personal loan with low interest to save the day. That is what one needs for quick cash in hand. And this way of loan is quite popular among the masses as well, as it does not need them to give any collateral, which makes personal loans, unsecured loans. And that is why banks charge high-interest rates on immediate personal loans.
In this article, we will discuss how banks offer them personal loans with low interest and how one can avail of the same.
Personal Loan: What Is It?
So, let us begin with knowing what personal loans are. Personal loans are unsecured loans that are cost-effective options with lower interest rates and can be used for emergency cases such as paying for education, marriages, renovations, etc. Personal loans are the perfect alternative to home and car loans which need collateral and credit cards since they carry a lesser amount of interest. Personal loans always should be taken knowing their needs and how much time one would need to repay the personal loan.
Perks Of Taking Personal Loans With No Interest
- No Collateral needed
There is no need for a person’s assets to be taken as security and keep them locked up. An immediate personal loan does not need them to pledge any collateral to the lender, unlike secured loans like car loans and home loans. They can use the loan in any way they want to and there would be no effects on their assets.
- Choosing Ways To Use the Loan
Any need, which will also include paying for travel, and college expenses, can be met with a personal loan. In a personal loan, one has the choice to spend the money wherever they see fit. One can easily get a loan if the lender qualifies them for the same.
- Instant Clearance Of Loan
An immediate personal loan is granted quickly when compared to other loans. All a person needs to do is fulfil the basic criteria set by the bank, and they can get a personal loan within a few hours to a few days. A personal loan can help if they need money for any reason.
- Perfect For short term
Personal loans are for shorter terms. It can be taken from a few weeks to many years. To make sure that one can repay the loan and also that their salary can meet the daily expenses, one needs to select the loan tenure.
How do Banks Offer Personal Loans With Low Interest?
By now, it should be clear what personal loans with low interest mean. Coming up next, it is vital to look at the factors that affect personal loan interest rates given by banks before learning how to get the lowest interest rates. Let us now see how banks can give out loans at such low-interest rates. Here is all that one needs to know about the factors that will help the bank in deciding whether to grant them the loan or not:
- Good Credit Score
The three-digit range of a credit score is 300 to 900. It shows if the borrower is worth the trust in terms of the loan. A score above 750 is taken as a good one and helps in getting an immediate personal loan with a low-interest rate. Their credit score is used by banks to check their credit history, debts, and chances of timely loan payback. If they have taken out a loan and repaid it on time in the past, the bank will view them as low-risk people for a loan.
- Consistency in job
An applicant with a regular full-time job who has shown growth or success in their career is always given an edge more than a freelancer or a person with a contract job. Steady work is seen as a surety for making monthly loan payments by banks. Before they choose a personal loan with low-interest rates, the banks also check their career history and the time they have been at their current job.
- Debt-to-income ratio
This debt-to-income ratio tells the banks whether the loanee will be able to pay off their loan and cover other expenses, such as their day-to-day household expenses, at the same time. To acquire the best personal loan with low-interest rates, it is best to maintain a debt-to-income ratio under 50%. Lending institutions look favourably on a 30–40% ratio.
The Bottom Line
We hope that by the end of this article, the readers have a good idea of how banks offer personal loans to common people at low-interest rates. While getting an immediate personal loan might be a difficult task, they can make sure to get one by maintaining a good credit score, looking out for offers from the lending institution, comparing the rates of interest, and at last negotiating for a lower interest rate with the lender.
If they are still unsure how banks can offer them personal loans with low interest and need to apply for one, they can contact Piramal Finance for further help, wherein they can guide them step by step through the whole process.