<p>Personal loans have become quite accessible for most working professionals. But there is a deciding factor that often makes people hesitant to apply for them. This deciding factor is the interest rate. Different banks and non-banking financial companies (NBFCs) offer different interest rates to borrowers. Moreover, the same bank may also offer different interest rates to different borrowers. This usually depends on several factors. So, if you are looking to get a low-interest personal loan, then here are the things that banks usually check.</p><h2><strong>1. Credit history and credit score</strong></h2><p>The first thing that banks check when you apply for a personal loan is your credit score and overall credit history. This includes checking whether you are repaying previous loans completely without any defaults and also whether you are regularly clearing credit card dues before the due date. Someone with a high credit score (also known as a CIBIL score) i.e above 750 is more likely to get a lower interest rate. This is because such a person is viewed as a low-risk lender. Whereas someone with a lower credit score and bad credit history is more likely to get a higher interest rate on <a href="https://www.idfcfirst.bank.in/personal-banking/loans/personal-loan" rel="nofollow">instant loans</a>.</p><h2><strong>2. Stable income and employment</strong></h2><p>Another factor that banks and non-banking financial institutions (NBFCs) check is the monthly income and employment of a prospective borrower. A lender with a stable monthly income is considered a low-risk lender by banks. Whereas someone with a seasonal or irregular income is considered a high-risk lender. So naturally, the former is offered a lower interest rate, and the latter is offered a higher interest rate for instant loans.</p><h2><strong>3. Debt-to-income ratio</strong></h2><p>Trusted banks like IDFC FIRST Bank<strong> </strong>often check additional parameters like the debt-to-income ratio to ensure that their patrons’ money is being utilised responsibly by lenders. This ratio demonstrates how much of a lender’s monthly income is used up in repaying loans. Someone with a lower debt-to-income ratio can get a lower interest rate, and vice versa. This is done to ensure that borrowers are easily able to pay off the loans that they take with their existing income.</p><h2><strong>4. Existing banking relationship</strong></h2><p>If you have an existing relationship with a bank, there is a high chance that you may be able to get a lower interest rate. In some cases, banks may also offer their regular customers a <a href="https://www.idfcfirst.bank.in/personal-banking/loans/personal-loan/debt-consolidation-loan" rel="nofollow">debt consolidation loan</a> that clubs their ongoing loans into one consolidated loan. So instead of paying several different equated monthly instalments (EMIs), you only need to pay one consolidated EMI. Existing customers of a bank may sometimes be offered a lower interest rate on such consolidated loans.</p><h2><strong>5. Current liabilities and other loans</strong></h2><p>Trusted banks like IDFC FIRST Bank also check the current liabilities and other ongoing loans of a loan applicant. Those with higher current liabilities tend to get a higher interest rate, or their loan applications may even get rejected. On the other hand, those with fewer current liabilities have a higher chance of getting a lower interest rate. This is once again a safety mechanism to ensure that banks use their patrons’ money responsibly.</p><h2><strong>Key takeaway</strong></h2><p>Getting approved for a low-interest personal loan isn’t just about filling out an application. Banks and NBFCs usually consider a combination of your credit history, income stability, debt obligations, and banking relationship when deciding whether to approve your loan and at what interest rate.</p>
<p>Personal loans have become quite accessible for most working professionals. But there is a deciding factor that often makes people hesitant to apply for them. This deciding factor is the interest rate. Different banks and non-banking financial companies (NBFCs) offer different interest rates to borrowers. Moreover, the same bank may also offer different interest rates to different borrowers. This usually depends on several factors. So, if you are looking to get a low-interest personal loan, then here are the things that banks usually check.</p><h2><strong>1. Credit history and credit score</strong></h2><p>The first thing that banks check when you apply for a personal loan is your credit score and overall credit history. This includes checking whether you are repaying previous loans completely without any defaults and also whether you are regularly clearing credit card dues before the due date. Someone with a high credit score (also known as a CIBIL score) i.e above 750 is more likely to get a lower interest rate. This is because such a person is viewed as a low-risk lender. Whereas someone with a lower credit score and bad credit history is more likely to get a higher interest rate on <a href="https://www.idfcfirst.bank.in/personal-banking/loans/personal-loan" rel="nofollow">instant loans</a>.</p><h2><strong>2. Stable income and employment</strong></h2><p>Another factor that banks and non-banking financial institutions (NBFCs) check is the monthly income and employment of a prospective borrower. A lender with a stable monthly income is considered a low-risk lender by banks. Whereas someone with a seasonal or irregular income is considered a high-risk lender. So naturally, the former is offered a lower interest rate, and the latter is offered a higher interest rate for instant loans.</p><h2><strong>3. Debt-to-income ratio</strong></h2><p>Trusted banks like IDFC FIRST Bank<strong> </strong>often check additional parameters like the debt-to-income ratio to ensure that their patrons’ money is being utilised responsibly by lenders. This ratio demonstrates how much of a lender’s monthly income is used up in repaying loans. Someone with a lower debt-to-income ratio can get a lower interest rate, and vice versa. This is done to ensure that borrowers are easily able to pay off the loans that they take with their existing income.</p><h2><strong>4. Existing banking relationship</strong></h2><p>If you have an existing relationship with a bank, there is a high chance that you may be able to get a lower interest rate. In some cases, banks may also offer their regular customers a <a href="https://www.idfcfirst.bank.in/personal-banking/loans/personal-loan/debt-consolidation-loan" rel="nofollow">debt consolidation loan</a> that clubs their ongoing loans into one consolidated loan. So instead of paying several different equated monthly instalments (EMIs), you only need to pay one consolidated EMI. Existing customers of a bank may sometimes be offered a lower interest rate on such consolidated loans.</p><h2><strong>5. Current liabilities and other loans</strong></h2><p>Trusted banks like IDFC FIRST Bank also check the current liabilities and other ongoing loans of a loan applicant. Those with higher current liabilities tend to get a higher interest rate, or their loan applications may even get rejected. On the other hand, those with fewer current liabilities have a higher chance of getting a lower interest rate. This is once again a safety mechanism to ensure that banks use their patrons’ money responsibly.</p><h2><strong>Key takeaway</strong></h2><p>Getting approved for a low-interest personal loan isn’t just about filling out an application. Banks and NBFCs usually consider a combination of your credit history, income stability, debt obligations, and banking relationship when deciding whether to approve your loan and at what interest rate.</p>