The personal loan is the loan product and is very popular among the people as it is easy to get. The personal loan is made for people who have their wishes and wants to fulfill their needs and goals. There are many dreams and wishes that we all have and sometimes it becomes difficult for us to realize it. The finances become the roadblock to let our dream come true. That is the time when you realize that taking a personal loan for it is the best idea. But then the personal loan is a loan after all and there will be repayments. Read the article to know everything about the personal loan interest rate and let all your apprehensions fly away.
The personal loan can be taken for any reason, the lender which can be the bank or NBFC do not ask the borrower for any reason at the time of sanctioning the loan amount. The amount of the loan generally varies depending on your eligibility criteria. Although, generally the maximum amount that can be levied is ₹ 30 lakh. The aim of this product is to fulfill all the personal need and help at the time of emergency which can otherwise be stuck or get obstructed due to lack of funds. The personal loan has many benefits like quick approval, no security or collateral etc. These and many such features in the personal loan are the main factors behind the popularity.
The personal loan interest rates that is levied on the personal loan is one of the main areas of concern for the borrower. The personal loan is a type of unsecured loan. The loan does not demand any type of security against it or does not need any guarantor. The lender sanctions the amount on the credibility of the borrower and the risk involvement here is slightly more than other loan products. The trustworthiness of the borrower is the main factor on which the lender depends while sanctioning the loan amount. Thus it charges high interest rate as compared to the other loan products.
Factors that affect the personal loan interest rate:
There are several factors that affect the rate of interest which partially depends on the market forces and few on the borrower themselves. Given below are few of the factors that affect the interest rate of the personal loan:
Credit Score– The credit score of the borrower is one of the important factors that are looked by the lender at the time of application. The credit history should be good in order to get less interest rate. As the lender is at risk, they see the past of the applicant and their repayment history. The more your CIBIL score the less will be your interest rate.
Personal Income– As mentioned above it is an unsecured loan, no security is put against it. The regular flow of income and job stability are the factors which build the trust among the lender that repayment is assured. The personal income needs to be at par and should match the eligibility in order to get the loan. The more your income and stability the trust factor increases and hence, the interest rate can be lesser than other who do not match the personal income criteria. So if you have less income, the lender charges you more interest rate and vice- versa. The income is inversely proportional to the interest rate. So, if one increases the other one automatically decreases.
Employer Brand– The company that you work for is also important at the time of bargaining for the interest rate. If you work for some reputed company which is a A- lister in the banks or other lender institute list then your chances of availing lower interest rate are much higher. The reputation of your employer brand is important as it reflects your credibility and they trust you due to your job stability. So you can obtain a low interest rate on your loan amount if you belong to a good and reputed company.
Relationship with the bank– The individual relationship with the bank is another factor which can help you to get a lower interest rate on the personal loan. The bank with whom you do your business would be the best one to get a personal loan from. They offer you less interest rate as you are the trusted customer and they want to build the more stronger bond and maintain their customer. It will enhance their aim of customer satisfaction.
Other market forces– The interest rate can change from time to time due to other external factors like the inflation, governments declaration, recession etc. With the rise of inflation in the economy the interest rate tends to increase. The change in the monetary policies directly and foremost affects the interest rate of the loan products.
Thus, all the factors should be kept in mind before bargaining for the interest rate with the lenders. These play the role in determining the leverage in the rate of interest and the extent up to which you can benefit in the process.