What are the factors that affect Personal Loan interest rates?

It is easy to get a Personal Loan in these times. A personal loan helps you to cater to your diverse financial needs and obligations. You can good deals on personal loan if you meet the financial institution’s eligibility criteria that affect the interest rate.

Whether you want to buy a vehicle, finance your child’s education, meet medical expenses, or are looking to fulfil any other monetary obligation, a Personal Loan is the ideal choice. You can use it for any reason and the approval and disbursement process is fast. It is an unsecured type of loan that never needs you to pledge any security or collateral.

As against secured loans such as Home Loans, the personal loan interest rate is typically higher. While applying for an instant personal loan , you may take the required steps to grab the deal in terms of the personal loan interest rate . Higher the rate of interest, the higher is the loan repayment amount. It fluctuates based on the candidate’s eligibility.

Personal Loan interest rates take into deliberation a range of factors. You need to know what these factors are and how they affect personal loan interest rate; these include:

Your Credit History: Before approving your personal loan application, a bank or NBFC generally evaluates your credit score. This is a three-digit number that Credit Rating Agency gives to individuals based on their credit repayment history. A good credit score specifies that you can take care of the loan well and repay it on time.

Your income: Your income is also one of the factors for securing an attractive rate of interest. Financial institutions charge a lower interest of rate if you have a fixed and guaranteed income. Candidates with higher monthly income are considered reliable because of their job security.

Your employment type: You have to have a secured and stable job to be eligible for an attractive interest rate. A Personal Loan is open for self-employed, salaried individuals and entrepreneurs. As Government and Private Sector employees have job security, the personal loan interest rate is usually lower for them.

Your relationship with the lender: If you have a loyal and great relationship with a bank or financial institution, you can negotiate on the interest rate. When the need for a Personal Loan comes up, you can take benefit of your existing relationship with the bank or NBFC and get an attractive interest rate.

Your repayment and loan defaults: Having a bad loan repayment repute or defaulting on loan debt your influences overall credit score. A low credit score implies paying higher interest on a Personal Loan or not getting your loan approved. Therefore, you need to have a good repayment history with no defaults.

Apart from the aforementioned factors, numerous other smaller factors can affect your personal loan interest rate. For instance, some lenders may provide you a lower personal loan interest rate if the loan tenure is short. Personal negotiation skills may also be helpful in getting a good personal loan deal sometimes. However, by knowing all the factors that affects personal loan interest rates, a person can be better ready when applying for a personal loan.