Personal loans are unsecured as lenders take risk by disbursing funds, without any collateral or guarantee. In this scenario, your credit score, which reflects past repayment behaviour, helps lenders in assessing the risk involved and taking a decision, as well as determining the interest rates in case the loan application is approved. Exhibiting strong creditworthiness generally helps borrowers get loans at better rates and terms.
Along with credit score, other pertinent factors also influence the likelihood of a borrower landing an offer with the best rates.
These factors include existing relationships with lenders, borrowers’ debt-to-income ratio, income profile and more.
Maintain high credit score
Credit score is one of the primary metrics lenders use for pricing a loan. Credit score shows how dependable you are as a borrower.
Lenders usually prefer borrowers with scores above 750, signifying lower risk.
To maintain a good score, ensure timely repayments of all existing dues, keep your credit utilisation ratio low and refrain from applying for multiple credit products within a short span of time. Consistent and disciplined behaviour helps build a strong credit score, giving you better leverage while negotiating interest rates and processing charges with lenders.
Compare multiple lenders
Comparing offers across lenders helps you easily scan and identify the best-suited offer. A simultaneous view helps in better analysis of rates and charges levied. A smarter approach involves comparing multiple loan offers in one place at financial marketplace platforms, rather than applying directly to several lenders, to minimise impact on the credit profile.
Relationship with lenders
Enquiring from the lender you have an existing relationship with can be a cost-effective way to borrow. Lenders extend pre-approved offers to select existing customers based on internal risk assessment. Your banking history or transaction record establishes the confidence of the lender in you. Because of this lower perceived risk, the lenders often provide better interest rates, faster approval, minimal documentation and sometimes lower processing charges on pre-approved loans.
Seasonal/festive offers
Keep an eye out for special offers from lenders from time to time. These personal loan offers are usually provided at discounted interest rates or with waived processing fees. Such offers are usually introduced during festive seasons for a limited period. Borrowers can time borrowing plans around such times to capitalise on these promotional offers and maximise their benefits.
Higher repayment prowess
Providing lenders with additional proof that shows higher repayment capability can also help in both the approval process and getting lower interest rates.
For instance, proof showing high income reduces the risk involved, as it shows higher repayment capacity. A higher income indicates a borrower is more likely to handle monthly repayments without financial strain. Additionally, higher income also reduces debt-to-income ratio, leaving the borrower with more disposable income to take on additional credit responsibly.
With low risk involved, borrowers can easily attract lower interest rates. Apart from these factors, another way to reduce your interest rate and processing fee is to negotiate with a lender when you have a high credit score, high income and fulfill all eligibility requirements.
In case your credit score is low, you can add a co-applicant with a stronger credit profile and stable income to increase the lender’s confidence in your combined repayment capacity, which may help improve your eligibility, especially for high-ticket loans.
(The writer is CEO of Paisabazaar)
Published on March 23, 2026