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Well, let’s face this fact first! Irrespective of how well you earn, at some point of time or other, you will still face the crunch situation and will be in need for a breather! This is when most of us think of a personal loan. For most, it’s the best decision to approach the bank and walk away with the required amount because there are hardly any hassles involved in But what is intimidating about personal loans is the interest rate charged.

Most established banks of India charge somewhere between17% to 25% interest per annum on personal loans. And by the time you have ended up clearing the principal amount, you realize how big a dent it has left in your pocket! So what’s the right thing to do in this scenario? Let’s sit back and do some fact finding!

Discount your interest on personal loansWell most of you must have picked up some newspaper to find the interest rates of one bank or other published in some conspicuous corners for various personal loan products! If these rates are weighing heavily on your mind, then don’t be disheartened! There is more to the advertised interest rate than meets the eye! As two different applicants for personal loans may get different rates! Also for similarly placed consumers, there is no such a thing as “standard rate” by a particular bank! What’s more interesting is the fact that the advertised rate of interest by the bank is nothing more than a “rack rate” on which significant discounts are available!

So it gets down to much simpler factor than you thought of ! these are –

  • Your profile
  • Your bargaining power.

Thus, if you have just started jostling around with the figures offered by the banks, be prepared to fight tooth and nail to get the best deal! And to get the best deal, all you have to do is make your profile very lucrative for the bank and then bargain hard on your interest rates !Taking a loan is a matter of you selling to the bank how easily verifiable your income is. If you do this part well, there is no reason why the banks will not be interested to lend you!

Go through the following steps for getting the best deal on your personal loans

  • Enquire at all possible banks offering the kind of loan you are looking .
  • Once you are approached by the bank, provide photocopies of as many documents that give proof of income as possible. Documents will include include income tax returns, bank statements, Form 16 and your salary slip.
  • The rate that you would be offered after your documents are looked at by the bank would often be lower than what you are offered at the first meeting. So do not take any decision before the bank reverts to you after examining your income documents.
  • Shortlist at least two banks (who offer the best possible rates and other terms relevant to you). Bargain with them on the interest rates!
  • Scrutinize the draft loan agreement to ensure that there are no hidden clauses that could affect you adversely. For example, several well-known banks have been known to introduce fine print in agreements that protect themselves but leave the loan applicant high and dry when certain drastic events happen. If necessary, seek the advice of someone in the industry that you know and can trust.
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