A personal loan can be a lifesaver when you need quick funds for emergencies, medical expenses, travel, education, or debt consolidation. However, one of the biggest concerns borrowers have is the interest rate. Even a small difference in interest can significantly impact the total amount you repay over time.
If you’re planning to apply for a personal loan, understanding how to secure the lowest possible interest rate can help you save thousands of rupees. This guide explains the key factors that affect personal loan interest rates and practical steps you can take to get the best deal.
A personal loan interest rate is the cost charged by a lender for borrowing money. It is usually expressed as a percentage and applied to the loan amount over a specific tenure. Since personal loans are typically unsecured (no collateral required), interest rates are generally higher than secured loans like home or car loans.
Interest rates may be offered as:
Fixed rate – remains the same throughout the loan tenure
Reducing balance rate – interest is calculated on the outstanding loan amount
Understanding how lenders calculate interest is the first step toward finding a low-interest personal loan.
Before learning how to reduce your interest rate, it’s important to know what lenders evaluate when you apply.
Your credit score plays a major role in determining the interest rate. A higher score reflects responsible repayment behavior and lowers the lender’s risk.
Score above 750: Better chances of lower interest rates
Score between 650–750: Moderate interest rates
Score below 650: Higher interest rates or limited options
Lenders prefer borrowers with stable income and consistent employment history. Salaried professionals, government employees, and individuals working with reputed companies often receive better rates.
Higher loan amounts or longer tenures can sometimes attract higher interest rates. Choosing a balanced tenure that keeps EMIs affordable without stretching the loan too long helps reduce interest costs.
If you already have multiple loans or credit cards, lenders may see you as a higher-risk borrower, which can increase your interest rate.
If you’re not in a hurry, take time to improve your credit score:
Pay EMIs and credit card bills on time
Reduce outstanding debt
Avoid multiple loan or credit card applications
Check your credit report for errors
Even a small improvement in your score can help you negotiate a better rate.
Never settle for the first loan offer you receive. Different banks, NBFCs, and digital lending platforms offer different interest rates based on their policies.
Online loan platforms make it easier to:
Compare interest rates
Check eligibility instantly
Understand total repayment cost
For example, if you’re exploring online options, you may come across platforms like Rupee112, which allow eligible users to apply digitally and review loan terms before proceeding. Comparing such platforms with traditional lenders helps you make a more informed decision.
A shorter tenure usually means:
Lower total interest paid
Higher monthly EMI
A longer tenure reduces EMI but increases the overall interest cost. To get the lowest interest burden, choose the shortest tenure you can comfortably afford.
If possible, apply for a personal loan when:
You’ve been in your current job for a longer duration
Your income has increased recently
Your salary is credited regularly to your bank account
This strengthens your profile and can help secure a lower interest rate.
Applying to several lenders within a short period can hurt your credit score. Instead:
Check eligibility through soft checks
Shortlist lenders first
Apply only to the most suitable option
This approach keeps your credit profile healthy and improves approval terms.
Many lenders provide pre-approved or instant loan offers to existing customers or eligible users. These often come with:
Competitive interest rates
Faster approval
Minimal documentation
Digital platforms that use technology-driven credit assessment may also offer flexible options for eligible borrowers.
Many borrowers overlook this detail, but it can affect their total interest outgo.
Flat interest rate: Interest is calculated on the full loan amount for the entire tenure
Reducing balance rate: Interest is calculated on the outstanding principal
Reducing interest rates on balances is generally more cost-effective and transparent. Always confirm the calculation method before accepting a loan offer.
Let’s say Rahul needs ?1,50,000 for a medical expense.
Lender A offers 18% interest for 24 months
Lender B offers 14% interest for 24 months
Even though both loans have the same tenure, the difference in interest rate means Rahul pays significantly less with Lender B.
While exploring online options, Rahul checks a few digital platforms and compares terms. If he needs quick processing and simple documentation, he may consider platforms like Rupee112, alongside other lenders, to evaluate interest rates, repayment terms, and eligibility before making a final decision.
This comparison helps him select a loan that fits his budget and minimises interest cost.
Ignoring processing fees and hidden charges
Focusing only on EMI instead of the total repayment
Not reading the loan terms carefully
Borrowing more than required
Always calculate the total cost of the loan, not just the monthly EMI.
Getting a personal loan at the lowest interest rate is not just about finding the cheapest offer—it’s about preparing your financial profile, comparing options, and choosing wisely. A good credit score, stable income, and smart comparison can make a big difference in how much you repay.
Whether you apply through a bank, NBFC, or digital lending platform, always review interest rates, fees, and repayment terms carefully. If you need a personal loan, explore multiple options, including online platforms like Rupee112, to find a solution that suits your needs without putting unnecessary pressure on your finances.
Rupee112 Lending Partners:
( All lending partners are RBI-registered NBFCs.)
SOLOMON CAPITAL PRIVATE LIMITED is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). RUPEE112 is the brand name under which the company conducts its lending operations and specialize in meeting customer's instant financial needs.
