How to get a loan, credit line interest free or at a lower rate

A collateral such as gold, property, FD and more could be submitted to avail a secured loan.

Getting a loan or a line of credit is quite easy these days, provided one is eligible for it. However, availing such a facility at lower interest rates is a different thing altogether. For this, you not only need to make some smart financial moves, but also need to be aware of the latest interest rates as also the tactics to get a loan or line of credit almost free or at lower rates.

Financial experts say that with the loan seekers getting smarter, one of the major concerns in modern times for them is to get it at a lower interest rate (or at no interest, if possible). “To attract those who like ‘free’ stuff, some free credit facilities are also available such as pay later services and credit cards. In case of these services, you get a free credit for a limited number of days till you don’t roll over your re-payments,” says Pranjal Kamra, CEO, Finology.

For instance, with ICICI Bank PayLater, you can get up to 45 days’ zero interest digital credit. You can pay your bills, shop online and pay to any merchant UPI ID instantly. There are some other such services available in the market like ePayLater, Amazon Pay Later, and LazyPay, among others, which provide zero interest credit up to a limited number of days or affordable credit in some cases. Experts, however, warn against using the ‘No Cost EMI’ facility because that’s basically a marketing gimmick and one may end up paying hefty processing fees, commissions etc.

However, “the limitation with the free credit services is the amount, as you can’t avail huge amounts as a loan along with flexibility of tenure, as you can’t avail credit for longer periods of time. For hefty amounts you have to opt for other loan options based upon your need. One thing which one should be careful about is not ending up paying tremendous interest rates. Therefore, it is advisable to go for a secured loan. Take a housing loan, for example,” says Kamra.

You might get a personal loan easily but, you will be charged almost double the housing loan interest rate. A collateral such as gold, property, FD and more could be submitted to avail a secured loan. Also, it is always better to apply at banks (whether public or private) rather than NBFCs which charge higher interest rate in lieu of slightly relaxed loan eligibility criteria and documentation.

If you are unable to avail a secured loan and want to go for an unsecured loan instead, in that case also you can get a loan at slightly lower rates by making some smart moves.

You must be aware that there are several factors that lenders consider before sanctioning a loan. Of all those, the first and foremost is creditworthiness. A valid credit score falls between 300 and 900, and, anything above 750 is considered excellent. But how do you ensure this? “To begin with, monitor your loan expenses and make timely repayments because delays can have a direct negative impact on your credit score. Maintaining a good repayment history keeps you in a better position to negotiate on interest rates with the lender whenever you apply for another loan in the future,” says Anuj Kacker, Co-Founder, MoneyTap.

Secondly, check with your existing lenders as they offer better service terms and relatively charge lower interest rates because of your pre-existing relationship. Apart from this, also look out for other lenders by visiting a financial marketplace, where you can compare and choose different types of loans with different interest rates. This will give you a clearer picture of the market and a better idea of lenders – including the new ones – who can offer loans at the lowest interest rates.

“Be attentive while you discuss the interest rates with the lender because you may end up paying higher interest rates despite the lender offering a lower rate on the loan. There are two types of interest calculation methods: flat and reduced. In the former, interest is charged on the actual loan amount until it is fully repaid. This will naturally cost you more interest. While in the latter, since interest is calculated on the outstanding principal, this will lead to a reduction in EMIs, and help you save money in the process,” advises Kacker.

Moreover, if you are working with a reputed employer, it may help you secure a good deal. Why? Because individuals employed in a well-known organization are believed to be more responsible as they have stable income levels and thereby can repay loans on time.

Similarly, if you are a high earner, say, Rs 1 lakh per month, it means you can afford more and hence the chances of untimely repayments or delay is least. Lenders trust such individuals more and grant them loans at a lower interest rate than a person coming under the lower-income category.