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Monday, February 6, 2023

Top factors that influence your personal loan interest rates

When you need money without borrowing from family or friends, a personal loan is an excellent solution.

When faced with a financial exigency, we all scurry around for funds. And, no matter where you get it, once the money gets available at short notice, it is always a cherished feeling. A personal loan is a popular source of arranging funds without borrowing from friends, relatives, or colleagues. A personal loan is essentially an unsecured credit, i.e., you do not have to pledge or place collateral with the lender to avail it. When pushed against the wall or facing a cash crunch, a personal loan is a helping hand that you can always rely upon.

Whether it is about meeting hospital bills, buying consumer goods, or an electronic gadget, a personal loan is there for you. In fact, while availing of a personal loan, you don’t have to even disclose the end-use of that loan. Whether it is a big-ticket wedding expense or a house renovation, personal loans can come in handy in all such situations.

Now you know where to arrange funds for your next family vacation!

While availing of a personal loan, what matters the most is the interest rate, based on which you will be servicing the EMIs. The lower the personal loan interest rate, the better it is as it results in a lower interest burden for you.

Factors that determine personal loan interest rates

Although several factors will determine the rate of interest of a personal loan, the prime among them are your nature of employment, your repayment history, your credit score (CIBIL score), and your income. Your eligibility to get a personal loan at a lower rate of interest will largely depend on the following factors:

Your income: Your income determines your repaying capacity and, hence, a higher income gives you the edge over others in availing of personal loans at a competitive interest rate. Your payment may turn out to be the most critical factor in fixing the personal loan interest rates for you.

Your CIBIL score: Along with your income, your Credit Score will also be an equally important factor that will help you land up a personal loan at a competitive interest rate. Credit Score is reflected as a 3-digit numeric rank provided by Credit Rating agencies based on your credit repayment history. A Credit Score of 750 is considered on a better footing and is preferred by lenders while sanctioning loans.

Credit Score is a mirror of the overall financial health of a borrower in terms of disposable income, existing loans, borrowing behavior, and repayment history. The higher the level of Credit Score of the borrower, the more is the comfort factor for the lender to lend at a lower rate of interest.

Your employment: Job stability and the nature of jobs also matter while availing of personal loans. If you are working in an established and reputable organization, the chances of getting a personal loan at a lower interest rate increase. At times, some lenders relax the lending guidelines for extending loans to borrowers of specific organizations.

Repayment history: Your previous repayment history will play an essential role in getting a personal loan at a lower interest rate. If you have been repaying any last EMIs on your car loan or a home loan, you stand to get a lower interest rate on the personal loan.

Debt-to-income Ratio: Your existing loans and the amount of EMIs will have an impact on your intent of availing of a new personal loan. Against your income, the lender will look at the total debt that you are currently servicing. Your total debt payments divided by your total income throws up the debt-to-income ratio – the lower it is, the better it is for you.

Existing relationship: If you already have a relationship with your lender and have previously availed of any of their products, it will help you get a better interest rate on your personal loan. As the lender is already aware of your income and other liabilities and if you have a clean track record of EMI payments, you stand to benefit from the existing relationship.

Here’s how to get funds in quick time

Personal loan interest rates vary across lenders for the same borrower. Your aim should be to look for a personal loan available to you at a competitive rate of interest. And, for that, you don’t have to look any further! Various personal loans options are available at attractive interest rates, starting at 10.99 percent.

Nowadays, you can avail of a personal loan through a simple online process with minimal documentation and easy-to-meet eligibility criteria. With the help of Available tools to help you check your eligibility, use the personal loan EMI calculator, and even apply for the personal loan online. As far as repayment is concerned, there are flexible repayment options with flexible tenure options of up to 6 years, thus letting you repay your personal loan EMIs at your convenience.

What’s more, Various Finacial Institutes appreciate your financial behavior to help you get a personal loan at the most competitive interest rates. No matter your need for funds, personal loans are there to fund your diverse financing goals or help you ease your tight financial situation.

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