Personal loans stand as a versatile solution, providing the means to address various financial needs. However, behind the convenience lies an important aspect that influences the overall borrowing experience: personal loan interest rates. Understanding the mechanics of these interest rates is critical for anybody considering applying for a personal loan.
What is a personal loan interest rate?
The personal loan interest rate is the percentage charged by a lender on the amount borrowed. It represents the cost of borrowing and is a critical component of the overall repayment structure. Personal loan interest rates can be fixed or variable, depending on the terms agreed upon with the lender.
The personal loan interest rate depends on numerous factors, each of which has a significant impact on the overall borrowing costs.
How to calculate interest for personal loan
The personal loan interest rate directly affects your overall repayment amount, making it essential to understand how interest is calculated. Either the flat rate or the reducing balance method to determine the payable interest. Knowing the calculation method helps you estimate your EMI and total outflow accurately. It's advisable to compare the Interest Rate on a Personal Loan in India before choosing a lender or deciding on the loan tenure.
Here are 4 factors that affect your personal loan interest rates:
1. Credit score
A key factor influencing your personal loan interest rate is your credit score. This three-digit number reflects your creditworthiness by summarising your financial habits and repayment history. A higher credit score generally indicates responsible credit behaviour, which can lead to more competitive interest rates.
2. Eligibility and required documents
Eligibility is often determined based on factors like your income level and job stability, which reflect your ability to repay the loan. A steady income and a consistent employment history show that you’re financially reliable, which can help you secure better interest rates. To strengthen your application, ensure all required personal loan documents are in place before applying.
3. Loan amount and tenure
The amount you choose to borrow, and the repayment duration can significantly influence your interest rate. Higher loan amounts or longer tenures may carry slightly elevated rates, as they pose a greater repayment risk over time.
4. Loan repayment history
Your history of repaying loans and credit card dues plays an important role in determining the interest rate offered. A clean record of timely payments reflects financial discipline, which can make you eligible for lower interest rates and improved loan conditions.
Bajaj Finance offers personal loans at competitive interest rates. You can also use the Bajaj Finserv Personal Loan EMI Calculator to determine the total interest payable. This calculator simply asks you to select your preferred loan amount, interest rate, and tenure.
You can adjust the EMI to match your repayment ability. This calculator also shows the breakdown of principal and interest amounts when calculating the EMI, as well as the total cost of borrowing.
Apply now and get the best offer on our personal loan.
Simple tips to get a personal loan at the low interest rates
To secure a lower personal loan interest rate, focus on improving your credit profile and making informed choices. The right approach can reduce your borrowing costs and help you access the best Interest Rate on a Personal Loan in India.
1. Maintain a Strong Credit Score
A score above 750 shows responsible credit behaviour, increasing your chances of getting a low interest rate on a personal loan.
2. Choose a shorter tenure
Shorter repayment periods often lead to reduced interest rates, making it more affordable.
3. Highlight income and job stability
Regular income and steady employment can help you qualify for a better interest rate on a personal loan.
4. Apply with a co-applicant
Adding a co-applicant with good credit can improve your chances of getting a lower interest rate on a personal loan in India.
