Personal loans are one of the easiest and most convenient debt tools. But the most important thing that you need to check before availing a quick loanis the interest rate. In India, today different lenders offer instant cash loans at various interest rates.

Interest rate is defined as the amount charged over the principal loan amount by the lender from the borrower. There are different parameters that influence this interest rate. The repo rate set by RBI is the first factor that influences your interest rate on the loan. The repo rate is the rate of interest at which RBI lends money to your lender.

In addition to the Repo rate, the rate of interest levied on the loan also depends on the operational costs of your lender, the profit margin maintained by your lender, and your credit profile. While you cannot influence the other factors, you can surely work towards improving your credit profile.

Read on to discover the best possible way to save your existing personal loan interest outgo.

Ways you can save on your personal loan interest

Most people think that once they have availed a personal loan, they are stuck with the interest rate for the rest of their loan tenure. But this is a myth. There are several smart financial hacks that can help you save on your instant cash loan interest outgo.

  • Improve your credit score

At times, when you apply for a loan during an emergency crisis, you might miss the initial research required to secure the lowest interest rate on your loan.You might also miss out on a better loan deal because of your credit score.

However, there are several ways to improve your credit score. Paying your personal loan EMIs on time and closing your existing loan accounts can help you in improving your credit score. Also, keeping your credit card utilization below 30% will help improve your credit score. Once your credit score improves renegotiate with your lender get a reduced  interest rate.

  • Make prepayments

Partpayment is paying out a lump sum portion of the principal loan amount. If you have taken an instant cash loan with a floating interest you can significantly reduce the applicable interest rate, by making part payment of the total outstanding amount. Usually, when you seek a personal loan with a floating interest rate, lenders do not charge you for making pre-payments. So, whenever possible, you shouldtry to accelerate the repayment process by making a prepayment. This would reduce the total outstanding principal amount and bring down the total interest payout as well.

  • Choose a step-down EMI plan

Several  financial institutions offer quick loans with step-down EMI plans. In a step-down EMI plan,you  pay a higher EMI in the initial months of the repayment term. These high EMI pays will reduce the total outstanding loan amount proportionately. Subsequently, the EMI amount for the remaining part of the tenure will go on decreasing. As a result, in the later part of the repayment tenure, your interest outgo will also reduce significantly.

  • Update your lender in case of a change of employment or salary –The interest rate that you pay for your instant cash loan is highly dependent on your borrowing profile. Apart from your credit score, the other prime component of your borrowing profile is your repayment capacity. If you have recently changed your job or you got a hike in your salary, you should inform the same to your lender. This is because a higher or better salary indicates your augmented repayment capacity. With new and increased income figures, you can negotiate for a lower interest rate.
  • Compare different lenders

If you feel that your existing personal loan outgo is very high, then you might compare different lenders in the market to find the lowest possible interest rate. There are several financial institutes that offer instant cash loans.If a reputed lender is offering you a considerably low-interest rate, then you can opt for a loan transfer. However, a loan transfer involves certain charges, so make sure you do the necessary calculations before opting for a loan transfer. Also, try to renegotiate with your existing lender before transferring your loan to a new lender. The point is you should not stop your research for an optimal and competitive lender just because you have taken a loan from one.


There are a multitude of ways using which you can reduce or negotiate the interest outgo on your existing personal loan. You can leverage your good relations with the financial institution, improve your credit profile and use your negotiation skills to get a lower interest rate. Other options like part-prepayments, pre-closure and opting for step-down EMIs can also help you save considerably on your total interest outgo. Keeping your interest pay out low is the key to smart financial management!

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