what is personal loan interest rate?
A financial institution like banks and NBFC’s lend money to individuals and businesses in the form of a loan. Now the question is what they get or earn by providing loan which is a risky business for them because there may be a chance where the borrower will not pay back the money. Money is considered as an asset to the lender will charge some amount from the borrower for his using his asset. Hence the amount charged by the lender is known as Interest. This amount is calculated as a percentage of the money offered which is known as an interest rate. The current prevailing interest rate in India is between 10% – 25%.
Impact of personal loan interest rate
What is the amount paid back by the individual who has taken a loan of 100000/- for a year @10% annually?
The amount paid back by the borrower to the lender will be a total of principal and interest. Let’s understand the calculation: –
Interest paid: – Principal*Rate*Time (100000*10%*1) = 10000/-
Total Amount paid: – Principal + Interest (100000 + 10000) = 1,10,000/-
Now imagine the interest rate is 20%, let’s do the calculation again.
Interest paid: – Principal*Rate*Time (100000*20%*1) = 20000/-
Total Amount paid: – Principal + Interest (100000 + 20000) = 1,20,000/-
The above illustration suggests that the borrower pays 10000/- more for the same amount of money borrowed for the same tenure if the interest rate becomes 20% instead of 10% which means that higher the interest rate higher will be the payback amount. Hence personal loan interest rate becomes an important component to be considered before finalizing the personal loan. Low-interest rate is always beneficial for the borrower as he/ she will pay a lesser amount to the lender and inversely the higher interest rate is beneficial for the lender as he/ she will receive a higher amount from the borrower. This is what we do for customers, we identify the best personal loan offer for them with the lowest interest rate depending on their creditworthiness.’
- Personal Loan interest rate is an important factor to consider before finalizing the personal loan. Always apply with those banks or NBFC’s giving a personal loan at a cheaper or lower interest rate
- A low personal loan interest rate is always beneficial for the borrower.
HOW CAN I AVAIL PERSONAL LOAN ON LOW-INTEREST RATE?
Giving a loan is a risky business for a lender whether it is a public sector bank or private bank or NBFC. Before giving the loan every lender will assess the borrower on a number of parameters to make sure that they are giving the loan to the right customer and he/ she will pay the installments on time. Below are the assessment parameters if the borrower clear all the parameters banks or NBFC’s would love to give him a loan at the lowest interest rate: –
- Credit History – This is the first parameter for any lender whether that’s a government bank, private bank or an NBFC. Every lender wants to evaluate the credit history of the borrower which gives a very fair idea about the character and the financial discipline of the borrower. Credit history is a reflection of the borrower’s character and financial discipline. If the credit history of the borrower is flawless, lenders would love to offer personal loans at the possible lowest interest rate.
- Credit Score – This is a mathematical representation of your credit history. 750 plus credit score is considered a good credit profile. Lenders would like to treat you as an elite customer and they will go all out to approve your personal loan instantly with a low-interest rate.
|Understand your credit score
|Between 650 – 750
|Between 750 – 800
|Between 800 – 900
- Income – This is another factor considered by lenders. High-income customers are good for the loan providers because there are low chances that they will not repay the loan and become defaulters. Personal loan providers have good experience of giving loans to all the income groups, lower annual income group customers are more likely to miss paying any EMI or installments so they may charge more interest from them.
- Employment Type – The interest rate offered by financial lenders may vary on the basis of employment type. A salaried customer poses a low threat to the loan providers as compared to self-employed as his or her income is fixed and comes on a fixed date which is not the case with the self-employed customers.
- Employer – Apart from your financial credibility your employer’s credibility and reputation play a vital role in deciding the interest rate. If you work for a reputed employer, higher chances are there to get a loan on a lower rate.
- Age of the Applicant – Low age applicants poses a low risk as compared to any applicant nearing the retirement age hence loan banks and nbfc’s may offer low-interest rate to young applicants.
Customers who fit maximum assessment criteria become a good risk profile for the loan providers and hence they enjoy loans at low interest rates.
Our Recommendation: – It is always advisable to know your credit score before applying for the personal loan or any type of loan. Any glitches or inaccuracies will decrease the credit score and decreases the chances of getting the loan instantly approved at the best interest rate.
How to improve my credit score?
Imagine you had taken a loan in past and paid all the installments on time, none of the installments got bounced, no outstanding or settlement has done against any borrowings with any lender, all these things make your credit history faultless, good credit score and you become the elite customer for the lender.
Below are the tips to increase credit score: –
- Timely payment of the loan installments: – Credit score is the reflection of your Financial discipline which is the first thing reviewed by the lender before giving a loan. Timely payment of all dues helps in improving your credit score. Never forget to pay your installments. This is one of the most important things to do to improve your credit score.
- Timely payment of credit cards outstanding amount: – Many times we miss to pay the credit card due which has a negative impact on the credit score. It also increases the financial burden on customers as the bank will charge interest on the due amount and late payment fees.
- Pay all the past dues: – If you have any past unpaid dues pay them immediately otherwise it will always remain as a black mark in your credit report.
- Always take the loan closure certificate or no objection certificate from the bank: – Once your loan is over, ask the bank to give you a loan closure certificate or letter. This is also known as the no-dues letter which is proof that you have paid entire loan amount to the bank and there is no outstanding. This will help you deal with an error that occurred in your credit score due to these loans.
- Credit utilization – Never utilize the entire credit limit of your credit card. This has a negative impact on your credit score. Always make sure that your credit card utilization is below the maximum limit of the card.
Benefits of good credit score or credit report
It is always beneficial to have a good credit score. Remember your credit score is the reflection of your financial discipline. Financial lenders are more interested to offer any type of loan to those customers who have shown good financial discipline in the past. They treat customers with good credit scores as low-risk customers.
Below are the few benefits of having a good credit score: –
- Instant online personal loan approval – Customers with a good credit score are the most elite customers for all banks and NBFC’s. As you are a low-risk customer to the loan providers they will offer you the personal loan instantly with a low-interest rate. You will get the online loan approval within minutes.
- Instant free credit card approval – This is another benefit of having a good credit score. You can get the best credit card immediately and maybe for free.
- Low-interest rate – You can always avail the loan on the lowest interest rate.
- Negotiation power – As there are a lot of loan providers ready to offer you the personal loan instantly, you have the power to negotiate with them on the interest rate. Always remember lesser the interest rate lesser the repayment amount.
- Eligible for best credit card and personal loan offers – Customers with a good credit score are the “best in class” for any lenders and they will be always eligible for the best offers. This is something good to feel about, isn’t it?
6 reasons to know your credit score or credit report
Before applying for any loan it is important for you to know your credit score, as your loan offer depends on the credit score. Below are the 7 reasons why it beneficial for you to know your credit score: –
- Know your financial health – As we do our regular medical checkup to identify any illness or ailment in advance before it becomes big, the Credit score is the indicator of your financial health. It is always good to know where you stand in terms of your financial health and if you see any concerns take the corrective measure now before it hurts you.
- Avoid surprises – Many times we have seen that people only come to know that there is something wrong with their credit score when their loan or credit card got rejected. It is always advisable to be proactive and do the needful beforehand.
- Fix the financial glitches – if there are any financial inaccuracies you can always fix them before applying for any loan or credit card. It would increase your chances of getting the loan and credit card.
- Avail the best offers – If your credit score is good you are eligible to get the best loan offers.
- Low-interest rate – Lower the interest rate lesser the repayment amount. By knowing your credit score you can always negotiate with the loan provider on the interest rate.
- Enjoy Easy and fast loan approval – Get the loan instantly, yes this is possible if you have a good credit score and you are aware of it. It gives you more power.
How can i check my credit score for free?
We can not only help you to check the credit score for free in fact we can also help you to improve your credit score if you have a low or bad credit score. No worries!!
If you are unable to get a personal loan due to bad credit scores, we can help you to get the personal loan at the best interest rate with the bad credit score. Click here for help.
can i get personal loan with bad credit SCORE?
We recommend taking the corrective action to improve your credit score immediately however if you are in urgent need of a loan we can help you to get a personal loan with a low or bad credit score. Click here for help!
There are few loan providers who offer personal loans to customers with a bad credit score and we are associated with them. There is always a silver lining! Click here to apply.
If your credit score is less than 650 we can help you to get the personal loan. Click here.