Factors affecting personal loan interest rates

A Personal Loan is one of the flexible option to fulfill your immediate financial needs if you are in a cash crunch. There are many personal loan providers in India. Lenders these days are coming up with variety of options to make personal loans accessible to people in India. You can apply for personal loan online or offline.

Lenders lend the loan at a interest rate which the borrower has to pay along with the principal. It is wise to choose the lender which offer loans at a lower interest rate. For that, you need to smartly and carefully choose the lender. It is important to understand the concepts of personal loan before you approach any bank as you would be better equipped to check the most reliable one.

Types of Personal Loan in India,

• Marriage loan
• Vacation Loan
• Festival Loan
• Education Loan
• Medical Expenses Loan
• Home renovation loan

Factors that determine the personal loan,

Lenders you approach

It is important to understand your lenders completely – their interest rates, fees, penalties, and/or other hidden charges. Different lenders have different interest rates which will impact your EMIs significantly. Use a platform like Fincover, which offers a one-window marketview of all the Personal Loan Lenders. Fincover is one of the fastest growing loan aggregator which has collated different loans from different lenders. Compare the interest rates from various lenders and choose the one that offers the best deal

2. Credit Score

A good credit score enhances your possibility of getting a good loan at the best interest rate. Credit score above 750 is considered as the good credit score. Your credit score gives a picture of risk bearing ability. People with good repayment record will have a good credit score. It is important that you have an idea about your credit score. Banks generally charge higher interest rates for players who have lower credit score, due to the inherent risk associated with such profiles

3. Your Income/Job Stability

Most lenders expect a minimum monthly income of Rs. 15000 for salaried employees and Rs. 25000 for self-employed individuals to sanction the personal loan. Also, banks expect a job continuity of more than 1 year atleast in the current role for salaried and 2 years in running their business for self-employed. If you are working in a reputed company, then your chances are high.

4. Know the interest calculation method

Most customers get enticed by the interest part alone without considering the other elements. It is important that you follow the complete loan calculation method of your lender while applying for a personal loan. There are two main methods for calculating the interest rate – A flat rate and a diminishing loan rate. A flat rate requires you to pay interest towards the loan amount throughout the entire tenure, where as diminishing loan rate requires payment of interest on the outstanding balance

5. Relationship with the lender

The other important factor that determines the rate of interest in a personal loan is the relationship you have with the lender. If you are a prior customer who has successfully repayed the previous loans on time, then the bank may offer a better deal for future loans. Your relationship with the lender can also speed up the application process. If you have multiple offers from previous lenders, you can check for the best deal using a proper EMI Calculator

Personal Loans are one of the most versatile financial solutions for immediate requirements as there are no restrictions on their usage. However, you will have to pick the most appropriate one best suited to your repaying ability. Keep these above-mentioned factors in mind while opting for a personal loan