Interest rates are a huge determining factor when it comes to loans of any kind. While most of us think there is no way that we have in the rate of interest on personal loans we avail, this is not completely true. Here are the major factors that influence personal loan interest rates so that you can monitor them and choose to tap areas where it can be reduced for you.
1. It’s All up to the Credit Score
The importance of credit score for a loan cannot be stressed just enough. A credit score is your ID card throughout the loan process. It shows a record of your past payments of loans and credit cards and the probability of you paying the installments of this loan regularly.
A credit score of above 750 is considered good by the bank and the better your credit score, the lower the rate of interest on personal loans.
Late payments directly affect your credit score, reducing it and thus, increasing the personal loan interest. Lower utilization of available credit on your credit cards also results in a better credit score.
Remember to not apply for too many loans at once which could reduce your credit score, thus increasing the rate of interest on personal loans.
2. When, Where and How Much
Your personal earning capabilities matter a lot when it comes to instant personal loans in Bangalore, Mumbai, Delhi, and other places. Borrowers who have stable occupation and a high-income job often become eligible for the best personal loan interest rates. The last 2 years of your employment record is what is often looked at, while some banks may go farther than that as well.
Having a self-employed professional is often a negative mark when it comes to personal loans’ interest rates and those who are traditionally employed may get a rate of interest on personal loans at a much lower point. Freelancers and ones who have small businesses or start-ups may face a similar situation and maybe at the disadvantaged end.
3. Relationship with the Bank
The bank takes into account not just these personal details but also the relationship you have had with the bank in the past to decide your personal loan interest rate. Having a long history of services available from the bank will give you a better start at availing a good rate of interest on personal loans because of loyalty.
Having a savings account or multiple fixed deposits in the bank will fetch you brownie points. A long relationship with the bank also means that you have an interpersonal connection with the personnel working there, which can help you get an interest rate lower than the ones usually applied on instant personal loans in Bangalore or wherever you are located.
A long and healthy relationship with the bank may even get you rates lower than the ones that are advertised for personal loans because the bank does not want to lose out its good customer and will take any step to retain them. Here are some tips for instant personal loan approval.
4. Loan Term and Principle
The amount of loan you are applying for and how long you will take to repay it back will all affect your rate of interest on personal loans. Personal loans that have a longer duration will result in a higher rate of interest on personal loans.
Long-term personal loans may prove to be costlier for the borrower in any case as the interest rates get accumulated for more period. Loans with a more principal amount of borrowing will also result in the personal loan interest rates rising as it involves an increased risk factor for the lender.
Some lenders choose to simply deny personal loans with a huge principal amount due to this risk. Having a good credit score may not help a lot here unless your score is exceptional in comparison to other borrowers.
5. Education and Reputation
Factors that affect your rate of interest on personal loans indirectly are your education and the reputation of the company you are working for. Having a good professional degree often acts as a security for your lender and they may give you lower interest rates in the hope that you will procure a well-settled job in the future and will be able to repay them, even if your credit history may not look very positive at the given moment.
They consider your new debt healthier than for, say, someone who is not as qualified academically as you are. Further, where you work is an important factor as well. Working in a highly reputed organization gives the lender the hope that you have a good job where you will not face income troubles in the future and will be able to pay them back without any difficulty. Availing personal loans can be tiresome.
The personal loans’ interest rates are more often dependent on multiple factors than we are aware of. From the credit score that you have to the kind of relationship, you share with the bank, all factors in as determinants. What your qualification is and where you are employed matter to the bank for the rate of interest on personal loans. How much money you are availing the personal loan for and how long you will take to repay it directly affect the personal loan interest rate. Fiofin’s instant personal loans are available to you at a click of your mouse.
Fill out an online application form and go through the criteria to understand how much interest rates are being offered for Fiofin’s instant personal loans for you based on your details. We offer some of the best personal loan interest rates for instant personal loans in Bangalore.