A personal loan is one of the most versatile funding options as it comes with zero restrictions on its fund usage. From vacation expenditures to home renovation, you can opt for a personal loan for all your requirements. However, before you hit on the personal loan apply button, you must ensure to compute your funding requirement and evaluate distinct loan offers to zero in on a prudent deal as per your budget. When evaluating distinct loan offers, the offered personal loan interest rate is an important parameter you must consider.
Note that personal loan interest rates differ across distinct lenders. Distinct lenders offer distinct personal loan rates depending on your credibility. One of the most important parameters assessed by the lenders to determine your personal loan eligibility basis which your loan rate is fixed is your credit score. Having a good credit score of 750 and above portrays you as a credible individual, who will repay the loan EMI on time and hence lenders tend to offer a lower personal loan rate.
Besides credit score, there are other important factors as well, which are assessed by the lenders to determine your personal loan rate. Read on to know.
- Your income
A higher income means a lower personal loan rate. Earning a higher income makes you come across as a reliable individual by the lender owing to your reduced default risk on loan EMIs. In contrast, if you earn a lower income, the lender may either turn down your personal loan application or accept your application at a higher personal loan rate. A higher personal loan interest rate is levied to compensate for the risk involved in lending to you.
- Your long-term banking relationship
You may approach a lender with whom you already share a long-term banking relationship in the form of a recurring deposit, fixed deposit, current account, savings account, etc., to avail a personal loan at a lower rate of interest. Owing to your long-term loyalty to the lender, they may offer you an attractive personal loan rate and zero or lower processing fees on the loan. So, being an old consumer, you will have some leverage over other consumers because the lender may not want to lose you.
- Your company’s reputation
The reputation of the company you work with also plays an important role in determining your personal loan interest rate. Working for a stable and renowned organisation allows you to enjoy a lower rate on your personal loan. This is because you are viewed as the one with a stable career, which displays your capacity to meet the loan dues in full on time.
Now as you are aware of the important parameters that affect your personal loan interest rate, the next measure is to make sure to compare the interest rates offered by distinct lenders. Doing this helps you to find a suitable lender according to your affordability and requirements. Once you have zeroed in on the lender, take the help of an online personal loan EMI calculator to calculate your preferred personal loan EMI and repayment tenure according to your repayment capacity and cash inflows.