Currently, the Personal Loan interest rate ranges between 10.50% to 24% p.a. The lowest Personal Loan interest rate starts from 8.75% p.a. There are several factors that influence the interest rate including economic conditions that fluctuate over time, the demand for money, supply of money, inflation, fiscal deficit, and government borrowing, etc.
Interest rate is one of the major factors that impact the loan amount while borrowing a Personal Loan in India. It is important for a borrower to read the terms and conditions offered by different lenders in the market.
Before you apply for a Personal Loan, you must compare the interest rates provided by the lenders. It will help you choose the lowest interest rate, allowing you to plan your repayment better. There are various factors that impact your Personal Loan interest rate such as the age of the borrower, credit score, income, etc.
Here are a few factors affecting Personal Loan interest rates:
There are various lenders in the market offering different rates of interest. Before finalizing a lender, you must compare the interest rates provided by all the lenders in the market. And choose the most suitable lender with a lower interest rate.
– Credit score
Credit score ranges between 300-900 where a credit score of more than 750 is considered a good credit score. A good credit score ensures that the borrower will repay the borrowed money on time. A credit score indicates the creditworthiness of a borrower. It shows the ability of a borrower to repay the loan on time. Any default in repayment impacts the credit score negatively. As a borrower, you should ensure that you make all the payments on time. A good credit score will also help you get a lower interest rate.
– Credit report information
Credit report information will help lenders understand any high credit card balances, credit inquiries, missed payments, etc. Credit report information shows the entire history of the borrower including the credit score. Before your loan approval, lenders ask for a credit report to check the creditworthiness of the borrower.
– Loan amount
A loan amount is a sum borrowed by a borrower from a lender. There are various factors that influence the final loan amount of a borrower. To get the desired loan amount, a person should meet all the eligibility criteria set by the lender – age, income, and credit score. Also, the interest rate for higher loan amounts may be on the higher side as compared to the lower loan amount.
– Repayment terms
There are three major factors involved while taking a loan – loan amount, interest rate, and tenure. You can pre-decide all these factors at your convenience. Also, all these factors are influenced by aspects such as income, age, credit score, and work experience. Your loan repayment tenure indicates a higher interest rate.
– Debt-to-income ratio
The debt-to-income ratio indicates how much money one owns and how much one earns. It basically shows if the person is capable to pay the debt with his current income. The lender will check the debt-to-income ratio of the borrower to check whether he/she is capable of the new loan. Lenders will offer a higher interest rate for a higher debt-income ratio.
A lender can offer a secured Personal Loan as well as an unsecured Personal Loan. For a secured Personal Loan, the borrower will have to pledge assets such as a saving account, certificate of deposit, or any other asset as collateral for the loan. Lenders offer a secured Personal Loan at a lower interest rate as compared to an unsecured Personal Loan. Moreover, if a borrower defaults on repayment, a lender can seize the collateral to cover the debt. For an unsecured Personal Loan, borrowers can apply for a loan without any collateral. However, the interest rate is on the higher side.
As you read the blog carefully, you can understand that there are several factors that impact the personal loan interest rates in india. The growth of Personal Loans in India has helped both borrowers as well as lenders. Borrowers now have enough choices to borrow money from the most suitable lenders. A borrower should ensure that while applying for a loan he/she must check all the details carefully. It helps them in understanding the complete loan procedure.