September 27, 2022

Interest charges are levied on the amount borrowed via a Personal Loan from the lending company. The lender collects interest and some portion of the principal loan amount In the form of Equal Monthly Installments (EMIs)Let us understand the concept of interest charges on loans with an example. Consider Personal Loan interest rates in a city are around 15%. Suppose a customer has applied for a Personal Loan of INR 2 lakh. The EMI amount will be part of the principal amount in the first loan installment. The remaining will be 15% of the principal loan amount. In the second installment, the remaining principal balance of the loan will decrease. It is because a part of the principal amount has been cleared in the first loan installment. The interest charges will be applied to the new principal loan balance in the second installment. The process continues throughout the Personal Loan tenure. Interest charges are applied until the entire principal loan has been paid off.

It is viable that the interest rates make a Personal Loan expensive. If the interest rates are high, Personal Loan EMIs will be bigger. Also, you will deposit more interest charges at the end of the loan tenure. For the same reason, people search for affordable Personal Loans with lower interest rates. However, a lower interest rate might not be available for all. Personal Loan  interest rates can change from one person to another and depend on multiple factors. Are you wondering how to calculate Personal Loan interest rates? You will have to divide the overall interest charges by the loan tenure. People can also use an online personal loan interest rate calculator for improved accuracy. Let us now understand the way to minimize the Personal Loan interest rates, Ways to minimize interest on personal loans

Some ways to minimize the interest rates on Personal Loans are as follows:

Pre-pay loans faster

When applying for a Personal Loan, the credit history is examined. Some lending institutions allow customers to pay more than the minimum due amount. You can repay the loan quickly by paying more than the minimum due amount every installment. Lending institutions prefer applicants that have finished previous loans before their repayment tenures. By pre-paying previous loans, you can unlock doors to lower interest rates.

Clear Old Debts

Personal Loan interest rates fluctuate from person to person. It is because the current debts of an applicant may play a role in deciding the Personal Loan interest rate. A person having many debt obligations may not pay the loan EMI timely. The risk of non-payment is greater for such a customer, so the loan provider offers a higher interest rate on a Personal Loan. On the other hand, an applicant with zero or minimal debt might get an affordable interest rate for a Personal Loan.

Choose Balance Transfer Services

Some lending institutions allow customers to transfer their loans to a different loan provider. Customers do so in search of better interest rates on Personal Loans. The remaining loan amount is transferred to a new lender, and lower interest charges are paid. However, not all financing institutions allow customers to opt for a different financer during repayment.

Maintain a Good Credit Score

Personal Loan interest rates depend heavily on the credit score. An applicant with a lower/poor credit score possesses a risk for the financing institution. The lending institution might never get its money back as the customer is not creditworthy. On the other hand, an applicant with a healthy credit score might get a personal loan interest rate. Customers with a good credit score are more likely to repay the loan without defaulting on their EMI obligations. By depositing credit card bills, EMIs, and debts timely, one can boost the credit score and improve their credit history.


Personal Loans can get expensive due to higher interest rates. For the same reason, you should cross-check the PL interest rate before submitting the personal loan application. One can be eligible for lower interest rates by clearing previous debts and foreclosing loans. Boost your credit score to unlock lower interest charges! 

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