The multipurpose nature of a personal loan makes it a reliable solution for any financial need. However, as you apply for funding, note that personal loan interest rates vary as per the lender’s specific terms and your eligibility. Hence, it’s advised that you carry out an interest rate comparison before you choose a lender. There are several factors that affect the interest rates on offer and knowing what they are can help you secure cost-effective financing. So, take a look at five important factors that affect personal loan interest rates.
Your current credit score
Your credit score indicates your creditworthiness to lenders and so the higher it is, the better are your chances of securing the lowest personal loan interest rate. Every time you make a timely EMI payment or completely resolve your debt, your score increases, and conversely, each time you default on a loan or pay credit card bills late, your score decreases. Hence, high scores are indicative of a responsible borrower, with scores in the range of 750-900 being considered ideal. Further, apart from affordable personal loan interest rates, ideal scores are a gateway to being able to borrow a higher sum.
Your net monthly income
Since a personal loan is a collateral-free offering, lenders verify whether or not you can repay the loan on time by taking note of your current income. Your monthly earnings would normally be utilized towards household expenses, investments, and fixed obligations; so, possessing surplus income is vital to getting loan approval. Further, on carrying out an interest rate comparison, you’ll notice that rates decrease as your income increases or as your current outgo falls.
Your employer’s reputation
Since a personal loan is unsecured, lenders must have faith in your repayment capabilities before granting approval. Coupled with a handsome salary, a stable job guarantees your lender of timely EMI payments all through the tenor. This is because having a job at a reputed company increases the stability and consistency of you receiving your income. In turn, this improves your chances of obtaining reduced personal loan interest rates.
Your age at the time of application
If you are at the start or end of your career, negotiating the personal loan interest rate may not be possible, as you may not have adequate income throughout the tenor. As a result, lenders may levy a higher rate of interest to mitigate any losses that they might incur. That said, if you apply for a personal loan in your 20s or early 30s, your income is expected to increase over the tenor, thus making it easier for you to borrow as compared to someone who’s at the end of his/her career.
Your relationship with the lender
If you are a long-standing, trustworthy customer of a bank or an NBFC, you stand a chance of obtaining financing at the lowest personal loan interest rate offered by the institution. However, this completely depends on the lending institution and your track record. While the interest rate on offer may seem to be marginal, on using your lender’s personal loan calculator to calculate loan monthly EMI, you’ll notice that even a change of 0.5% can cause your outgo to reduce significantly, especially over a long tenor.
So, keep these factors in mind as you scout for the lowest personal loan interest rates in India. Apart from understanding these factors, securing the best personal loan interest rates in 2020 also boils down to picking the right lender and striking a balance between affordability and features. One solution that offers many benefits is the Bajaj Finserv Personal Loan. It offers a high loan amount of up to Rs.25 lakh at competitive rates of interest. Further, its Flexi loan facility allows you to withdraw from the sanctioned amount in parts, without any additional charges or applications. Here, you are charged interest only on the amount you withdraw.
Check your pre-approved offer today by providing your name and contact details. Doing so gives you access to a customized deal and on sharing basic details, you benefit from instant approval too.