How to Negotiate Personal Loan Interest Rates?

It is well-established that personal loans in the UAE are among the most powerful financial tools available to be used in the hour of need. Whether it is about paying off school fees, medical bills, expanding business, or some other expenses, personal loans are sufficiently versatile to be used for most expenses. 

At the same time, this versatility of personal loans comes with a little eccentricity of its own, i.e., the interest rate. Finding lower interest rates for personal loans is a difficult task, considering their rates are higher than most other loans. While personal loan interest rates are not exceptionally high in themselves, lower rates would always be beneficial for you as a customer.

In that light, let’s discuss whether you can negotiate personal loan interest rates with the lenders and how, if the answer is affirmative. 

Can You Negotiate Personal Loan Interest Rates?

First thing first – can you negotiate personal loan interest rates? The answer: Yes you can! While banks and lenders are not very keen on the negotiations as they will be losing their earnings that way, there is certainly scope to get the personal loan interest rates reduced. 

A personal loan in Dubai is one of the most preferred forms of loan by customers. Most of these customers are responsible and have good relations with the banks. Thus, as a gesture of goodwill, the bank often decreases personal loan interest rates in many cases. However, the extent of reduction can differ as per the individual. 

What Are Some Tips to Facilitate Negotiation?

While the art of negotiation comes naturally to some, the good thing about negotiations is that anyone can easily learn them. Given below are some things that you can do and follow to make your case appear strong in front of the bank or the lender and get personal loan interest rates reduced: 

1. Be Firm and Confident 

Confidence is the most important fundamental thing that you will need to accomplish this task. Be confident while stating your demands and demonstrate similar assurance when negotiating them. 

It’s not necessary that the bank will simply agree with your conditions or terms and give you the interest rate that you are asking for. Consequently, you will have to present a strong case to the bank or the lender to even start considering the terms. For this reason, make sure that you are firm as well as respectful in stating your terms for the personal loan interest rates. 

2. Be Prepared to Walk Away 

Keeping your options open is one of the most crucial aspects of the negotiation of personal loan interest rates. There is no assurance that the bank will fulfil your demands or even come to a fair decision even if both parties are at benefit. If you are firm in your requirements and consider them non-negotiable, you should be prepared to walk away and explore other lenders and banks for the loan. 

3. Research and Prepare 

Negotiations require thorough research about the topic or the product that you will negotiate about. They can be considered debates where you have to give rebuttals or answers for everything said by the lender or the bank concerning your demands. If your research is thorough enough to convince the bank that it will still benefit from giving you the loan, the negotiations will prove worthwhile in terms of lowering of interest rates. 4

4. State Terms That are Equally Beneficial for all

Always remember to not go overboard when demanding a lower interest rate. Just like all businesses and organisations, banks have their monthly and yearly targets to fulfil to stay in business. Interest charged on loans and credit cards is one of the major ways for these institutions to achieve these targets. 

As a result, if you ask for an interest rate that is too low for the bank to allow, your negotiations will be bound to fail. Moreover, banks also have a set minimum bar for the interest rates that they can offer to their customers. Thus, you should try and come to a number that is mutually beneficial for you and the bank to increase the chances of approval. 

5. Be Prepared to Put Counter Offers

Counteroffers are the basis of negotiations. If your first suggested personal loan interest rate gets directly rejected by the lender or the bank, you should try and make counteroffers. Several fees are charged on personal loans in the UAE besides the interest rate. You can conduct thorough research about them and find out the ones which the bank would be willing to remove. Except for government-imposed fees like registration fees, all other fees are open for negotiation. 

What Are Some Ways to Further Support the Negotiations?

Learning how to be prepared for negotiations and how to present yourself is only one half of the whole process necessary to finally reach there. Several things can be done in advance to make your negotiation case stronger. The following are the things to take care of:

1. Maintain a Good Credit History 

If the bank is going to consider giving you relaxation on personal loan interest rates, it will be possible only when you have a high credit Score. So make sure that you take your credit responsibilities seriously to ensure that your credit score is always near the higher end.  

2. Keep Your Repayment History Flawless

A good credit score goes hand in hand with a good credit repayment history. If you pay your credit cards in full every billing cycle and stay under your suggested credit limit, you will be able to present yourself as a responsible debtor. 

3. Learn the Interest calculation Methods 

Interest on personal loans in Dubai is either calculated at fixed rates or reducing rates. Fixed-rate personal loan interest rate will have you pay more interest during the whole tenure of the loan compared to the reducing rates. 

You can research and negotiate the type of interest rate that the bank can give you. You can also use the personal loan calculators available online to find the difference between both types of interest rates for personal loans in Dubai offered by the banks. 

4. Take Advantage of Your Employer’s Reliability

Working with a high-end blue-chip multinational company can work in your favour. The better your employer’s goodwill and reliability with respect to company turnout and job stability, the better your chances of paying off the loan. Personal loan applicants with safe and high-earning jobs have higher chances of having things tipped to their side. 

5. Maintain Good Relations with the Banks and the Lenders 

This goes without saying but loyal customers get special treatment in all business sectors and fields - banking is no different either. If you have a good relationship with the bank and are perceived as one of the loyal customers, you may have a chance of getting a special low-interest rate personal loan in UAE. To do this, you should choose your banks wisely from the start and stick with them. 

Conclusions

Negotiations are not always sure to succeed, sometimes even when you are an excellent negotiator and have tried all the possibilities. Even though you are supposed to be firm in your standing when negotiating the personal loan interest rates, you should also know when to take a step back and change your terms a little bit - enough for the bank to consider them practical. With a little push and extensive research, you can get your personal loan interest rate lowered significantly.