Personal loans can come with costly interest rates. However, there are ways to get it reduced. You only need to ensure a few essentials for this purpose.

Good Earning Record

If you have been earning steadily for a few years, it indicates a stable history of income. This itself not only makes you eligible for a personal loan but also gives you the benefit of a lower interest rate. One of the eligibility criteria for acquiring a personal loan is at least two years of job history and/or a year with the present company.

If you are working at a famous private company or a public organisation, you get more favourable loan conditions, including a lower interest rate. The underlying belief is your stable income due to which the probability of defaulting is minimum.

Good Repayment History

If you have been earning steadily for the past few years but have been delaying your payments, it negatively influences your creditworthiness. In this case, no lender will be able to trust you for repayment.

On the other hand, if your repayment record is acceptable, the concerned lender will not only happily accept your loan request but also will be willing to settle with a lower rate of interest than usual. So, do pay all your installments and bills on time. It is essential to sustain a good record of repayment, which in turn, helps in maintaining a good credit score.

Good Lender Relationship

If you have a good relationship with the lender or the lending organisation, it is likely to fetch you a personal loan with a good bargain. You can easily manage to get a discount on the interest rate as well as favourable terms and conditions.

The reason is that your lender knows you well in terms of your credit history and responsible behavior in paying off all dues. Thus, for the lender, the extent of risk involved in lending to you is less than to an unknown borrower.

Reducing Balance Method Calculation

The reducing balance method is used to calculate the interest to be paid across the loan term. If you do not ensure this, you will end up paying up more interest amount when the term is over.

Typically, lenders use either a flat or reducing rate. If a flat rate is charged, the interest is applied to the full loan principal throughout the term. On the other hand, in case of the reducing balance method, the loan interest is levied only on the outstanding amount to be repaid. 

Thus, this method will make you pay less interest than the flat rate charged. It is always wise to ask the method that your lender uses to determine the interest amount payable on the loan taken so that you can ensure that reducing balance method is in use.

Lucrative Offers

Do not take a personal loan just because you have a good relationship with the lender or have a good credit report for negotiation. Rather, be a bit wise and look for special offers that lenders such as banks tend to give on personal loans. These offers could be the lowest interest rate for a limited time and wide range of loan amounts.

They provide such offers especially during the festive season or recession recovery. During such times, lenders are likely to attract probable borrowers by launching alluring schemes.

Comparison Skills

If you have a good credit score and a steady source of income, you will have the option to choose from a couple of promising lenders. In that case, it is wise to compare their terms and conditions along with eligibility criteria. This will help you grab the most economical deal.


These essentials will surely give you the relief of repaying at a low rate.

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