All you need to do to reduce interest rates on your loans is to do a little effort in terms of research and inquiries. There are several ways you could reduce your interest rates on loans as well as overall costs.
a) Personal Loans Vs Gold Loans Vs Loans Against Shares
The type of loans you take would make a difference in terms of interest rates. Personal loans could come slightly cheaper than gold loans depending on your own credit worthiness. You could still end-up with personal loan interest rate of around 12 per cent, while gold loans could come slightly more expensive. But, the 12 per cent mentioned above is the best you could get, while personal loans can go as high as 24 per cent interest rate per annum.
Loans against shares is another good option, but, here you would have to have a specified category of good quality stocks, if you wish to avail a loan.
b) Different Interest Rate From Different Banks
You would also have to do a little more research, if you want to get a competitive interest rate for loans. For example, for home loans at the moment State Bank of India is the best. There are portals that offer you a comparison of interest rates, but those need to be updated at regular intervals.
c) Cheaper Education Loans For Girls
Remember that education loans are cheaper for girls. Most of the government banks charge reduced rate for education loan for girls. So, if you are looking to raise money for the study of a girl, it's best to look at education loans and not opt for personal loans to raise the required resources.
d) Avoid Personal Loans As There is A Huge pre-payment Charge
Try and avoid personal loans as they come with huge pre-payment charges. For example, a leading private sector bank charges as much as 4 per cent on the outstanding loan amount as pre-paid charges. Therefore, try and shift to another loan like a loan against shares.
e) Home Loans Comparison A Must
Since home loans are big ticket loans a small difference of 0.10 per cent can mean a lot. It is best to compare loans before you go in for a home loan. At the moment, HDFC and State Bank of India would be the best around.
f) Do Not Prepay A Loan In Advanced Stage of Completion
In the initial part of the loan the servicing of the interest rate is far higher. So, in the latter part only a small portion of interest and majority of principle amount remains.
Let's give you an example. If your personal loan is for 5 years and you have already completed 4 years, it does not make sense to repay the loan, because bulk of it would now be principle amount. What's the use of paying it back, when your interest component in the loan would almost be negligible. You would hardly save on interest by paying early.
Remember to do adequate research before you go in for a loan. A small saving in interest can actually mean a lot. Use all of the above measures to reduce your loan liability.