How to Negotiate a Lower Interest Rate on Loan?

Updated on: 3 August 2023

Published on: 19 April 2021

Financial institutions like banks and NBFCs carefully analyse various factors while deciding the loan amount, interest rates and other features of your loan. These factors include your income, employment, credit score, credit behaviour and more.

Securing low-interest rate loans helps you save money while providing some financial leeway. So, read on for some strategies you can adopt for getting loans at low interest rates.

Strategies for Negotiating a Lower Interest Rate on Loans

Here are some easy-to-follow methods you can adopt to get low-interest rate loans.

1. Maintain a Healthy Credit Score

You can boost your chances of getting loans at low interest rates by maintaining an optimal CIBIL score of 750 or above. To achieve this score, repay the EMIs of your loans and clear your credit card bills on time. 

Additionally, keeping your credit utilisation ratio below 30% is ideal, as this implies that you have a strong financial standing and do not rely entirely on credit for your expenses. You can also ensure you have experience with a mix of different types of credit options to boost your score. 

Apart from these tips, don’t forget to check your CIBIL Report for any discrepancies and errors. If you encounter any errors, get them fixed as a priority since these errors can have a negative impact on your score. 

2. Build a Good Repayment History

Clearing your credit card bills in one go is a smart approach rather than just paying the minimum due amount. Similarly, ensure that you also pay your monthly loan instalments on time. 

All these factors are a sign of strong repayment and this track record creates a positive impact on your credit score. This also makes it easier for you to negotiate with the lender and avail of loans at lower interest rates.

3. Research and Compare Interest Rates

Researching and comparing interest rates offered by various financial institutions is a great strategy for getting loans at low interest rates. Assess your requirements and check your eligibility to choose a loan that is the best fit for you. 

You may also take advantage of the festive season to get special offers and discounts that provide lower interest rates on loans. In addition, pre-approved offers can help you get credit at discounted rates, which you can secure when you have a good credit score and some experience with banks and NBFCs.  

4. Check the Interest Calculation Method

Even if the lender offers a lower interest rate on your loan, you may find yourself paying a higher interest. Why? Since lenders utilise different methods for interest calculation and one may result in higher interest payment than the other. 

There are two ways of calculating interest. The flat interest rate is where interest is calculated on the entire loan throughout the tenure. Another method is the reducing interest rate, where interest is calculated on the remaining outstanding amount as EMIs minimise the principal amount.

A personal loan at a reduced rate can help you pay off the loan with lower interest than on loans at a flat rate.

5. Benefit from the Credibility of Your Employer

If you are working for reputed or multinational companies, you have a higher chance of getting favourable loan deals. With your employer’s ability to provide a steady job and paycheck, lenders conclude that you are more likely to have a stable income to repay the loan on time. Thus, getting a lower interest rate on loans will be easier.

For this, all you need to do is apply for loans from financial institutions that are associated with your lender. You can also check if your employer is listed by the credit provider under the eligibility terms. 

6. Maintain a Good Employment History

Certain banks or NBFCs may ask for a work experience of at least a couple of years with at least one year of experience in your current job. This is because lenders are looking for stability before they offer loans at nominal interest rates. 

Those who are employed with state or central government organisations are also considered favourably by lending institutions and have a higher chance of getting low-interest-rate loans.

These tips will help you get loans at competitive rates, but before finalising a lender, reviewing and comparing different lenders is essential. However, relying only on the interest rates is not enough. You must also consider other factors such as the fees and charges, amount, tenure, etc.

If you want a personal loan at low interest rates, Fibe can help you manage your financial needs with ease. You can get a maximum loan amount of up to ₹5 lakhs at interest rates starting from just 2% every month. 

At Fibe, you can get affordable loans instantly with a simple online application process and minimal paperwork. Simply download Fibe’s Personal Loan App or log in to our website and get funds hassle-free.

FAQs on Negotiating a Lower Interest Rate on Loans

How to negotiate for lower credit card interest rates?

You can negotiate for lower credit card interest rates by building a positive credit score and repayment history. Also, you can research and compare different providers and switch to a credit card issuer offering affordable interest rates.

Can you negotiate interest rates with banks?

Yes, you can negotiate interest rates with banks by showcasing a great credit score, stable income and more. 

How to reduce personal loan interest rates?

You can reduce your loan’s interest rate by negotiating with your current lender or by doing a personal loan balance transfer. Alternatively, you can borrow from another lender offering lower interest rates, like Fibe. Personal loan interest rates at Fibe start from just 2% per month.

How do I avoid paying higher interest on a loan?

You can avoid paying higher interest rates on your loan by opting for a lender offering affordable interest rates, such as Fibe. In addition, you can get nominal interest rates on loans when you have a good credit score and meet all the eligibility terms.