A Personal Loan is one of the best ways to obtain short-term financing, with benefits like competitive Personal loan interest rates and flexible payment options. You can use a Personal Loan to consolidate debt, finance home improvements, cover an emergency expense, or even purchase a luxury item. Curious to know more about Personal Loan interest rates? Read on to find out more.
What Factors Influence Personal Loan Interest Rates?
NBFCs consider many factors when deciding the Personal Loan interest rates for each applicant –
- Credit score
- Loan term
- Monthly income
- And more
Below you can find how these affect your Personal Loan interest rates.
Credit Score
The best part of getting a Personal Loan is that you don’t have to provide any security or collateral with the lending institution. Therefore, credit score becomes one of the most critical factors for Personal Loan interest rates. If you are prudent in managing your debt and have a solid history of paying off your finances, you will have a higher credit score. NBFCs like Clix Capital consider an Experian credit score of 630 or more to provide attractive interest rates to their borrowers. If you have a poor credit score, you can take corrective measures to improve the score and get good deals on future loan applications.
Income Status
NBFCs look at the salary you receive in a month and your employment history. This helps them assess your ability to repay the amount comfortably.
Loan Term
The longer your loan term, the lower your Personal loan interest rate is. Short-term loans are generally payable in one year or less, while long-term loans can be paid in up to four years, accumulating more interest.
Residential Status
Your residential status significantly influences your Personal Loan interest rates. When it comes to Personal Loans, the borrower is not required to deposit any security, leaving the lending institution without any collateral. Therefore, lending institutions want to ensure an applicant is a reliable person with a permanent residential address.
Are You an Existing Client of The Lending Institution?
If you have been a customer of a financial institution for a relatively long period and are in good standing, it is easy to negotiate for lower rates. For example, Clix capital can provide better personal loan interest rates to their regular borrowers.
How to Calculate Personal Loan Interest?
Calculating interest rates on Personal Loans is a simple process. You will find a Personal Loan calculator on the websites of leading NBFCs.
Here’s how it works:
- You can feed the variables such as the loan amount and tenure of payment to see what interest rates will apply to your loan.
- You can also use a Personal Loan calculator to work out various EMI options you can have so that you can choose the most affordable one.
Repayment Schedule: Why is it crucial?
You should make sure that you read the loan repayment schedule document carefully since it contains all the details about your loan. It shows how much you need to pay every month.
Therefore, it works as a ready reckoner whenever you need to check your outstanding amount.
It can also help you in budgeting your monthly expenses.
So, if you have multiple loans to repay, this schedule comes in handy. That way, you won’t miss any payment and can avoid higher interest rates and fines charged by the lending institution.
Final Words
Those looking for low Personal Loan interest rates can use the Personal Loan calculator to check their EMI. It lets you know how much interest rate and EMI you will have to pay for a certain loan amount in the chosen tenure.
