Personal loan as the name suggests is designed to meet our emergency fund requirements, whether related to child education, home renovation, or a wedding. You are not answerable to the bank for availing the loan, but yes, you need to look out for the interest rate. Unlike home loan or education loan, a personal loan is offered at variable interest rates ranging from 11.9% to 24%.
Undoubtedly, everyone of us would like to have a lower interest rate. Let’s look at the factors influencing your personal loan interest rates and save some money for ourselves:
What’s your Salary?
How else can your higher income delight you? The more you earn, the lower will be your personal loan rate of interest. For banks, your salary is an assurance of repayment. As per the current industry trends, you are levied an interest of 16%–20% if you earn up to Rs. 50,000 per month. The interest rate is further reduced to 14%–16% on a monthly salary of Rs. 50,000–Rs. 1lac. Also, you can negotiate on the interest rate and get as low as 12% if your salary falls into the bracket of Rs 1lac or more.
Credit history is a crucial factor deciding your loan interest. Being an unsecured loan, banks consider your credit score to analyze your past repayment behavior. The score is calculated by CIBIL on the basis of your credit card bill payment and repayment of other loans. A poor credit history can levy you higher interest rates and at worst, banks can even reject your loan application. Thus, before filling a personal loan application, check your credit score.
Where you work?
When finalizing your personal loan interest rate, banks also consider the reputation of the organization you work with. You can luckily enjoy lower interest rates on personal loans if you are associated with a renowned and stable organization. Satisfied with the stability of an individual, banks get assured about the responsible attitude of an individual toward debt repayment.
Your loyalty with your bank can help you fetch lower interest rates on personal loans. Having a savings account along with fixed deposits or other saving instruments in one bank builds an interpersonal relationship that gives way to attractive rates. On the basis of your good relationship you can negotiate for better rates and banks never want their customers to approach other financial institutions, so the story of interest rate is likely to end on a happy note.