What are the factors that affect Personal Loan interest rates?
September 22, 2020
It is easy to avail of a Personal Loan as it helps you to meet diverse financial needs. You can avail of the deal only if you meet the lender’s eligibility criteria that affects the interest rate.
Whether you want to buy a car, fund your child’s higher studies, meet wedding expenses, or are looking to fulfil any other financial obligation, a Personal Loan is the right choice. You can use it for any purpose and the disbursement process is quick. It is an unsecured loan type that never requires you to pledge any collateral or security.
As against secured loans like Home Loans, the rate of interest is typically higher. While applying for the loan, you may take the necessary steps to grab the deal in terms of the interest rate. Higher the rate of interest, it means paying higher loan repayment amount. It fluctuates depending on the candidate’s eligibility.
Personal Loan interest rates take into consideration a lot of factors. You need to understand what are these factors that affect the loan rate; these include:
- Your Credit History: Before approving the Personal Loan, a lender usually evaluates your CIBIL score. This is a three-digit numeric rank that the Credit Rating Agency provides to individuals depending on their credit repayment history. A good credit score indicates that you can manage the loan well and repay it on time.
- Your income: Income is also one of the factors for getting an attractive rate of interest. Banks charge a lower rate if you have a fixed and guaranteed income. Higher-income candidates are considered reliable due to their job security.
- Your employment type: You need to have a secured job to be eligible for an attractive rate. A Personal Loan is open for self-employed, business owners and salaried individuals. Since Government and Private Sector employees have job security, the interest rates for a loan is offered at a lower rate.
- Your relationship with the lender: If you have a loyal relationship with a bank, you can negotiate on the Personal Loan interest. When the need for a Personal Loan arises, you can leverage your existing relationship with the bank and avail of an attractive interest rate.
- Your repayment and loan defaults: Having a bad loan repayment reputation or defaulting on loan debt affects your overall credit score. A low score means paying high interest on a Personal Loan or not getting loan approval. Hence, you need to maintain a good repayment history with no defaults.
If you’re looking for low interest rate Personal Loan, ICICI Bank’s Personal Loan interest starts from 10.75% per annum. Once you get the approval of the bank, the loan gets credited to your account within 3 seconds.
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