Small instant loans, also known as short-term loans, are loans up to ₹2 lakhs intended to be repaid quickly. The tenure could last up to two years, but not longer. Typically, a small personal loan is acquired to cover short-term financial needs.
However, interest rates still matter when applying for an instant loan. Finding a favourable interest rate will make your loan repayment easier and budget-friendly. Here is a guide to getting small instant loans at low-interest rates.
1. Get a good credit score
Credit score is a measure of your creditworthiness as a borrower. The three-digit ranges between 300 to 900. A score above 750 is favourably and aids in getting a loan with a low-interest rate. A score above 750 demonstrates lenders you are consistent with your repayments. Therefore, you can get affordable personal loan rates with a good credit score.
2. Check your debt-to-income ratio
In addition to paying off your debts on time, you should keep an eye on your debt-to-income ratio to raise your credit score. It helps lenders determine how much additional credit you can take on. Maintaining your debt-to-income ratio under 50% is best to acquire the best personal loan interest rates. Lending institutions ideally look for a 30–40% debt-to-income ratio.
3. Compare between lenders
Finding the best personal loan needs investigation. To discover the loan with the best interest rate and features, compare the available personal loan lenders. Online personal loans include interest rates that range from 13% to 35%, depending on various factors.
For instance, at IDFC FIRST Bank, personal loan interest rates are offered to applicants based on their age, monthly income, work profile, employer’s income, credit score, repayment history, and other factors. Also, check your eligibility and apply for a loan online. The personal loan amount can be disbursed to your account 24 hours after receiving approval.
4. Look for shorter tenure
The typical maximum payback term for personal loans is 60 months. If your budget allows it, choosing a shorter term is possible. In addition to helping you qualify for a personal loan with affordable interest, shorter periods will also help you save money on interest.
5. Maintain a good credit history
Your credit history and score are connected. Try to pay off any credit card debt you may have. Your loan application may be turned down if you have a history of missing payment deadlines or are a loan defaulter. Be vigilant about paying your debts on time. Wait a few months after putting these measures in place before submitting a loan application.
6. Check your income
Since it affects your capacity to repay, your income plays a significant role in determining the interest rate on your personal loan. As a result, if your income is consistently high, you are viewed as a low-risk borrower.
You can bargain with the bank for an affordable interest rate on personal loans if you meet the qualifying requirements with a good score. Before applying for a loan, you must check for offers from reputable lenders like IDFC FIRST Bank.
Note: This story is for informational purposes only. Please speak to RBI-registered Banking before making any Loan related decision.