If there’s a personal loan in process, then we expect you to take a well informed decision. Cost comes first to the mind when you’re applying for a personal loan. Conduct a thorough search and compare the interest rates offered by different banks.
When it comes to a Personal Loan, we already know that different banks offer differing rates. Once you go deep into the research, you will realize that most banks and financial institutions have different criteria to set up their interest rates (Whether we talk about private or public banks). Whether you are salaried or self-employed, certain factors are taken into consideration. Here, we have listed out a few factors that affect your personal loan interest rates as shown below.
Income is the first factor to decide to whether you want to take a personal loan or not. Yes, a personal loan being unsecure gives some kind of security to the bank. This is how the bank gets to trust you. It is precisely based on the income money you’re making. The more you’re making as income, better are the chances for a personal loan at lower rates. This will help the bank to take a justified decision. A bank will greatly be assured if you have an income above the risk limit.
- Company Position
The next most important factor would be the company position. This plays a substantial role in taking a fair call on the personal loan interest rates. Since it’s an unsecure loan, banks/financial institutions use different parameters to gauge the status of your company. This is one of the best ways to realize whether you deserve a personal loan or not. Furthermore, the kind of organization you work with or associated is really important to avail personal loan. Banks/ financial institutions use different standards to evaluate the net worth of your company. The parameters are defined within every category set out. Basically if you’re working with a newly opened venture, then you have chances for high interest rates.
- Credit & Payment History
Banks/ financial institutions verify your credit score (CIBIL) before processing to lend personal loans. Obviously if your profile is flawed, then financial institutions may choose to not consider your loan application (or with higher rates of interest). CIBIL shares a credit range between 0-900, where above 750 is acceptable. CIBIL score ranges between 0-900, and to avail the personal loan banks consider the score above 750 and here, if it flies over 800, then consider a straight 25% drop in the interest rates.
- Relationship with Your Bank
To achieve lower rates of interest, personal loan will depend on the relationship shared with the bank. A goodwill factor always makes a difference. If you have an existing salary account, then the chances for a personal loan are higher. As a part of the retention strategy, banks tend to offer reasonable rates to older clients. So, keeping up a good relationship with the bank will affect your personal loan interest rates.
- Individual Negotiation Power
If you’re in the system for a long time, then it offers an extra edge. It is obvious that an esteemed customer will have added advantages with respect to interest rates, fees, etc. This will of course provide the best of services. Based on your negotiation power, the bank will take a close call.