What is a Low-Interest Personal Loan? How to Apply?

By Pardeep Garg
  | Published: 18 June 2021

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A personal loan is a readily available financial tool that can be used to take care of a big upcoming expense. Banks offer personal loans for several reasons, including paying off healthcare bills, buying a new property or a car, starting a business, etc. While loan amount is essential for every individual, the ultimate thing that interests everyone is the interest rate. You will have to pay off the principal amount anyway, but the loan's interest rate decides the additional amount you repay the bank. This is why a low-interest rate on personal loans is a benefit that everyone is looking out for when trying to get a loan approved. 

A low interest personal loan is just a simple personal loan with a relatively lower interest rate as compared to its counterparts. The difference between the interest rates can be based on loans offered by different banks or different kinds of loans provided by the same bank. The low interest rate of a personal loan can also be a part of a promotional offer for a few excellent customers qualifying for the lower interest rate on the loan. 

How Does a Low-Interest Personal Loan Work?

The concept of personal loans, whether with high or low-interest rates, is straightforward. The banks lend the money to those applicants whom they see as trustworthy debtors. The interest rate charged on the person is directly proportionate to your credit history, repayment history, and trustworthiness as a debtor. So, low-interest rates are offered to the individuals who are exemplary in the eyes of the bank. 

Typically, a low interest rate of personal loans would come with a few conditions. There can be some minimum required conditions such as preferred occupations, credit history, credit score, etc. You can get a low-interest rate on personal loans in the event of a unique ongoing promotion as well. You may not have to qualify for the special conditions put forth for promotional low-interest personal loans. 

How Can You Get a Low-Interest Rate of Personal Loan?

Conditions of getting a low-interest rate of personal loans are not very different from the general personal loan application conditions. However, you have to be an exceptional customer for the bank to allow you a lower interest rate on personal loans. Following are a few things that you need to achieve or do to qualify for a low-interest personal loan in UAE:

Have a Fantastic Credit Score 

Having a high credit score is extremely important when it comes to a low-interest rate of personal loans. Banks take your credit score under consideration even when you apply for a standard personal loan with basic interest rates. A credit score of a minimum of 700 is considered adequate in the UAE banking sector. To qualify for a low-interest rate of personal loans, you need a credit score that can be considered 'great' by the bank. Some banks may also have a minimum credit score condition on their low-interest personal loan. Keep an eye out for it. 

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Have Someone Co-Sign the Loan with You 

Banks will tend to offer you better conditions on your loan, i.e., lower interest rates, if they see that you have an excellent repayment capability. If someone co-signs the loan with you, you divide the responsibility of paying back the loan, which ultimately betters your chances. So, if the banks allow joint names for the personal loan with a low-interest rate, you should consider finding a partner for the co-signing of the loan. 

Be Prepared for a Rigorous Credit History Investigation

Most banks do not pre-approve or pre-qualify candidates for low-interest rate personal loans. They prefer to have a hefty background check after the application is submitted. This is because low-interest personal loans are a bigger risk for the banks. Hence, they need to be extra with the applicant's credit history. 

Have an Occupation Preferred by the Bank

Government occupations and jobs or jobs related to banking sectors are some of the occupations that banks prefer when qualifying people for personal loans. Having a high-security job would mean that you will have a good regular source of income and hence a better repayment capacity than other applicants. 

Have Great Relations with the Bank

People with a good relationship with their banks have a better chance of getting a low-interest rate for personal loans. Most banks like to appreciate their loyal customers and offer them better deals in banking products and services. Your relationship with the bank proves to be a deal maker when the low-interest rate of personal loans is considered. 

Shorter Repayment Period

Short repayment period generally come attached with a low-interest rate for a personal loan. Since the banks are already taking a higher risk by lending them money at a lower interest rate, they prefer it if the repayment period is shorter. If you have applied for a shorter loan period, your chances of approval are better in every sense. 

Stay on track with the Promotional Offers 

Even if your bank does not offer a special low interest personal loan, there are several promotional events that they host during a year. They provide a lower interest rate on personal loans than they generally do during promotional events. Stay on top of these events to make sure that you can get the interest rate you desire rather than the higher one. 

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Conclusion

A low interest rate of personal loans is a great financial tool to solve your economic fallbacks without culminating a lot of interest. But you have to be an excellent candidate to qualify for this kind of personal loan - someone significantly trustworthy for the banks. Make sure your credit score and repayment history speak for you when you apply for a low interest rate personal loan. You will indeed become one of the top choices for the banks for a low-interest personal loan.