- July 21, 2020
- Posted by: Ganeshcbani
- Category: Blog
Personal Loan is unsecured loan advanced on the basis of your credit history and ability to re-pay the same from your personal income. It is also called as consumer loan. It is a multi-purpose loan which you can borrow to meet your immediate needs.
Do you wish to renovate your house? Or fix a car or need some funds for a holiday or your wedding? Then Personal Loan would be a reliable instrument to source some funds.
As personal is an unsecured loan, interest rate on personal loan is generally higher than home loan or car loan. Hence, you need to know your finances well in advance before you opt for one.
Do not test your credit report
Before you apply for a loan, lenders test your creditworthiness by gathering your credit report from credit agencies. Your credit score indicates how responsible you have been in the past with credit. Typically, banks and other institutions find a credit score of more than 750 to be safe. Unless the credit score of the creditor is less than 750, the request is likely to be denied. Many borrowers use credit risk pricing in order to assess the loan rates for the applicant’s credit score. In this scenario, a high loan value will help you get loan deals at lower rates.
When you submit a loan application, you can also review your credit report to prevent any potential mistake that might lead to a denial of your loan. Be sure to report the mistakes, if any, to the office and lender concerned so that rectification is carried out as early as possible.
Give several lenders direct applications
We launch credit report requests from loan offices to determine your creditworthiness when you explicitly apply a credit application to lenders. These requests from the lender are called hard inquiries, and they are listed in your credit report’s enquiry section. Several loan applications can substantially reduce your credit score in a short period of time.
The online finance market can compare and select the most appropriate lender based on your credit value, income and other eligibility parameters rather than submitting direct personal loan applications. While these markets also collect your credit report from the offices, these requests are regarded as soft inquiries that do not influence your credit value.
Not compared between different prospective lenders
Because the personal interest rate for loans will range between 10.35 percent and 24 percent p.a., it is wise to compare the correct loan product and borrower online with your credit score, income and other eligibility requirements. Don’t limit your reference to the interest rate alone. Before closing in to a particular borrower, you must also contribute to processing fees, prepaid fees and other applicable terms and conditions.
Ignoring your willingness to repay
Lenders can determine the repayment potential by calculating the Fixed Revenue Obligation (FOIR), i.e. the share of the total debt servicing revenue received. As lenders generally prefer FOIR applicants within 50%-60% (including EMIs) of the new loan, make sure that you choose a loan term whose EMI keeps your FOIR in that sphere. Borrowers with a lower recovery ability will opt to have a longer maturity period with less EMI. Nonetheless, longer term also means higher interest rates and thus, consider prepaiding your personal loans whenever surplus funds are available. By doing so, ensure that the net expense savings greatly outweigh the advance payment costs incurred by your lender.
No alternate loan options considered
Should not ignore alternate lending options including secured lending options, like home loans, equity loans, land loans, and FD loans. Compared to personal loans, these loans do not have end-use limits and typically have lower interest rates and longer term than personal loans. For example , current home loan borrowers may select supplementary home loans at interest rates typically as low as 8% p.a. And term that can be up to 30 years, depending on the duration of the remaining home loan. Likewise, those with substantial long-term investments may consider making loans to securities, without selling their securities, to meet their financial shortfalls at lower interest rates.
Factors affecting interest rates for personal loans
Many factors are involved in determining a borrower’s interest rate. Before approaching the bank for a personal loan, you have to keep the things in order:
Those with higher income are less likely to default on the credit and less likely to lend to the bank. They therefore have lower interest rates. Those with a lower income have to pay higher interest on a loan because the lender considers them ‘more risky.’
This reflects your debt history and repayment ability. Credit Score. The bigger the debt, the lower the interest rate. Ensure sure you have a loan score of 750 or higher when applying for a loan.
If you are an employee, especially in a reputable organization, you will probably have a lower rate of interest. Interest rates for self-employed persons are generally higher.
Younger lenders have a lower interest rate than those entering retirement. Age: That is because lenders consider young people with healthy salaries less risky than older people who might soon retire. Bear in mind that your age will affect your rate of interest.
The interest rates offered to existing customers are often lower than those offered to new customers. When you have an established bank or mortgage account, you can negotiate at a lower interest rate.
Where to get lowest personal loan interest rate?
Some of the biggest things to look for when applying for a personal loan is your credit. Find your loan ratings. Find out. Unless the score is less than 600, the appeal will be denied. Make sure it’s a total of 750. A higher credit score could help you negotiate a lower interest rate with the lender.
The second thing that is most important is dealing with the lender. You don’t need to embrace the lender’s interest quietly, especially if you have a strong credit score or have a current customer. Negotiate the way you do something and press for a lower fee.
Make sure you keep your credit score. Pay the credit card payments and loans on time. Compare the interest rates and deals of various banks until you settle on the loan. Select an deal that best suits your requirements. You do not get to pay the lowest interest rate. You can also prefer a loan with a longer term, a zero processing fee, or a bank that allows you to close a loan account without penalty of closing penalties.
Just like toys, loans are sold during the holiday season, too. Search for exclusive deals such as reduced interest rates, zero fees, and others. Banks also try to cancel the last EMI.
|Axis Bank||12-24%||50,000-15 lakhs|
|Bajaj||12.99% onwards||Up to 25 lakhs|
|Citi Bank||10.50-18.99%||50,000-30 lakhs|
|Fullerton India||12-36%||Up to 25 lakhs|
|Hdfc Bank||10.75-21.30%||50,000-40 lakhs|
|Icici Bank||11.25% onwards||50,000-20 lakhs|
|Idfc First Bank||11.50% onwards||1 lakh-25 lakhs|
|IndusInd Bank||10.75% onwards||50,000-15 lakhs|
|Standard Chartered Bank||10.99% onwards||1 lakh-30 lakhs|
|Kotak Mahindra Bank||10.99-24%||50,000-15 lakhs|
|Sbi Bank||10.50% onwards||Up to 20 lakhs|
|Tata Capital||10.99% onwards||75,000-25 lakh|
|UCO Bank||10.95% onwards||Up to 10 lakhs|
|Union Bank Of India||10.10% onwards||Up to 10 lakhs|
|Yes Bank||10.99% onwards||1 lakh-40 lakh|
Where to measure personal loan interest?
EMI or Equated Monthly Installment is the monthly payment to be charged by the borrower to repay the loan. The EMI is determined by the loan number, the interest rate paid, and the term of the loan, three important facts.
You don’t have to measure the EMI yourself now
Many banks and banks sell their websites with a free EMI Calculator app. The amount of the loan, the interest that will be paid and the time during which you intend to borrow can be entered. You can change these variables and find an acceptable EMI.
If you would like to learn how EMI is measured, here is the formula:
EMI = P . r . [(1+r)n/(1+r)n-1],
If P is the loan number, r is the monthly interest rate, and n is the tenure.