The lending market is soaring as several financial institutions offer personal loans at competitive interest rates. Before you apply for a personal loan be thorough with the best personal loan interest rates available, save on some money and also meet your financial emergency. This article brings every detail you need to know to be an informed borrower.
What is a Personal Loan?
Personal loans are unsecured loan products offered by banks and NBFCs for a fixed tenure at a predefined interest rate. The rate of interest varies from 8% to 49 %. The borrower needs to repay the loan in regular monthly instalments. This loan product is unsecured and hence-forth doesn’t ask for collateral against the amount.
Moreover, the financial institutions don’t restrict the borrowers on the usage of the amount. The borrower can use the loan amount to finance their education, wedding, vacation, medical emergencies, home renovation projects, car, or business needs. This freedom to use the loan amount per one’s will makes personal loans the most sought-after loan product and attracts more and more people in need of monetary aid.
What is the personal loan interest rate?
Simply put, the personal loan interest rate is the rate of interest that the borrower needs to pay beyond the principal amount. However, several factors come into play when one wishes to grab the best personal loan interest rate. Personal loans are unsecured, convenient and safe to apply for but often incur higher interest rates when compared to other secured loans.
The total cost of the personal loan is directly proportional to the interest rate and loan tenure. An increase in either of the factors increases the total cost of the loan. It thus becomes imperative to grab a personal loan offer with a low rate of interest.
The personal loan interest rateis a deciding factor that determines the overall cost of the loan. A higher interest rate means you will end up paying more to the lender. To save on some money, it is thus critical to compare different lenders in terms of their offerings before accepting the loan offer.
The personal loan market is beaming with lenders offering attractive deals and interest rates people in need of financial aid are turning towards them. In the spirit of competition some lenders match your needs and requirements better than others. To choose the best deal, one should be aware of all the factors which affect the personal loan interest rate.
FACTORS AFFECTING THE PERSONAL LOAN INTEREST RATE
Income: Before offering the loan, the lenders check your financial credibility to know about your loan repayment capacity to minimize their risk. Usually, the higher income of the applicant results in quick loan approval and attractive interest rates.
- Credit score: The credit score of the applicant mirrors the creditworthiness of the applicant, it highlights the transactions of their previous debts and chalks out the defaults (if any). The higher the CIBIL score, the better are the chances of availing low personal loan interest rate deal. The credit score is a critical factor in personal loan eligibility criteria.
- Employment: Lenders prefer salaried individuals over self-employed and non-professionals and offer better personal loan interest rates deals with them.
- Employer: While offering a personal loan, the lenders also consider the employer. Big established companies, multinationals, and government sector companies are preferred in comparison to smaller unknown firms. If the applicant is working in a named organization, chances of him getting a good interest rate deal manifolds.
- Equation with the lender: Long relationship and good equation with the lender also ensures better personal loan interest rate deals.
With the pandemic creating havoc in the world, many people are seeking personal loans to meet their basic monetary needs like making payments for rent, EMIs or to take care of their day-to-day expenses. In line with the social distancing norms, financial institutions offer their loan products through their online platforms. Applying for a personal loan is now easier, faster, and more convenient.
Fintechs like LoansJagat offers a comparative platform wherein the applicants can compare different lenders and choose the best loan from over 40 banks and NBFCs. Their fully secure platform takes care of the whole loan application process at the click of the button.