Many people find personal loans appealing, but there are a few things to consider before applying for one. Even after considering all of the viable options for your personal loan and knowing that your future chances for repaying a prospective personal loan in full appear to be steady, interest rates play a significant role in your decision.
The rate of interest for a personal loan can vary from person to person as the interest rates are fluctuating by nature. Ranging between 12% to 24%, the interest rates are determined on how well you meet your lender’s eligibility criteria. This might be the reason why two people looking to borrow money can get different interest rates even from the same lender.
In this article we will discuss some crucial factors that can affect the interest rates you get on your personal loan. So, if you’re planning to apply for one, make sure you keep these in mind.
- Higher Credit Scores, Lower Interest Rates
When it comes to loan approvals, your credit score is quite essential. It not only determines if the loan will be granted, but it also influences the interest rates the most. Generally, credit score reflects the overall financial health of a person in terms of income, existing debt, borrowing behavior, and past repayment history. A better credit score increases the trust in a borrower’s sense of financial responsibility, allowing them to take out loans at cheaper interest rates than others. A CIBIL score of greater than 750 is usually regarded to be good.
- Higher Income, Lower Interest Rates
Your income is the most important factor in determining your personal loan interest rates. It is a well-known fact that responsible people with a high discretionary income have a higher repayment capability than those with lesser incomes. People with a high and consistent discretionary income tend to get reduced interest rates on their loans, which is a standard practice in the lending industry.
- Your Employer’s Status
Because personal loans are generally unsecured, lenders check for a variety of criteria to ensure the applicant’s creditworthiness, one of which is your employment. The rationale for this is simple: borrowers who work for a well-known company are seen to be more financially stable and reliable for making regular payments. As a result, lenders may have more liberal lending standards if you work at a recognized organization.
- Your Relationship with the Lender
When lending to a loyal consumer, lenders are more liberal with interest rates. They develop a sense of reliance as a result of their long and devoted connection. This trust does not develop overnight; it takes time and appropriate behavior on the part of bank clients who retain their loyalty. This may also be the case with peer-to-peer lending. When individual or institutional lenders recognize your loyalty, they are significantly more likely to offer you a better price than newer clients.
- Your Default History
If a lender discovers defaults in your credit history, they will either charge you a very high rate of interest or even reject your loan application, similar to examining your credit score. Most lenders favor customers who have had no defaults in the previous year.
Here at Home Credit, we offer personal loans up to 2 Lakhs at affordable interest rates with instant approval & NO hidden charges. If you’re planning to apply for a personal loan, simply get in touch with us to determine the best deal we can offer you. Check your eligibility criteria, calculate your EMI & apply within 2 minutes on our site www.homecredit.co.in.