Top factors that affect your personal loan interest rates

Updated: August 10, 2021 3:33 PM

While availing a personal loan, what matters the most is the interest rate, based on which you will be servicing the EMIs.

personal loan, interest rates, money, loan, funds, lower rate of interest, income, higher income, Credit Score, CIBIL scoreA personal loan is a popular source of arranging funds without having to borrow from friends, relatives or colleagues.

When faced with a financial exigency, we all scurry around for funds. And, no matter from where you get it, once the money gets available at short notice, it is always a cherished feeling. A personal loan is a popular source of arranging funds without having to borrow from friends, relatives or colleagues. A personal loan is essentially an unsecured credit, i.e. you do not have to pledge or place a collateral with the lender to avail it. When pushed against the wall or facing a cash crunch, a personal loan is the helping hand that you can always rely upon.

Whether it is about meeting hospital bills, buying consumer goods or an electronic gadget, a personal loan is there for you. In fact, while availing a personal loan, you don’t have to even disclose the end-use of that loan. Whether it is a big-ticket wedding expenses or a house renovation, personal loans can come handy in all such situations.

Now you know from where to arrange funds for your next family vacation!

While availing a personal loan, what matters the most is the interest rate, based on which you will be servicing the EMIs. The lower the personal loan interest rate, the better it is as it results in a lower interest burden for you.

Factors that determine personal loan interest rates

Although, there are several factors that will determine the rate of interest of a personal loan, the prime among them are – your nature of employment, your repayment history, your credit score (CIBIL score) and your income. Your eligibility to get a personal loan at a lower rate of interest will largely depend on the following factors:

Your income: Your income determines your repaying capacity and, hence, a higher income gives you the edge over others in availing personal loans at a competitive interest rate. Your income may turn out to be the single most important factor in fixing the personal loan interest rates for you.

Your CIBIL score: Along with your income, your Credit Score will also be an equally important factor that will help you land up a personal loan at a competitive rate of interest. Credit Score is reflected as a 3-digit numeric rank provided by Credit Rating agencies based on your credit repayment history. A Credit Score of 750 is considered to be on a better footing and is preferred by lenders while sanctioning loans.

Credit Score is a mirror of the overall financial health of a borrower in terms disposable income, existing loans, borrowing behaviour, and repayment history. The higher the level of Credit Score of the borrower, the more is the comfort factor for the lender to lend at a lower rate of interest.

Your employment: Job stability and the nature of employment also matter while availing personal loans. If you are working in an established and reputable organization, the chances of getting a personal loan at a lower interest rate increase. At times, some lenders relax the lending guidelines for extending loans to borrowers of specific organizations.

Repayment history: Your previous repayment history will play an important role in getting a personal loan at a lower rate of interest. If you have been repaying any previous EMIs on your car loan or a home loan, you stand to get a lower rate of interest on the personal loan.

Debt-to-income Ratio: Your existing loans and the amount of EMIs will have an impact on your intent of availing a fresh personal loan. Against your income, the lender will look at the total debt that you are currently servicing. Your total debt payments divided by your total income throws up the debt-to-income ratio – the lower it is, the better it is for you.

Existing relationship: If you already have a relationship with your lender and have availed of any of their product previously, it will help you get a better rate of interest on your personal loan. As the lender is already aware of your income and other liabilities and if you have a clean track record of EMI payments, you stand to benefit from the existing relationship.

Here’s how to get funds in quick time

Personal loan interest rates vary across lenders for the same borrower. Your aim should be to look for a personal loan that is available to you at a competitive rate of interest. And, for that you don’t have to look any further! Tata Capital personal loans are available at attractive interest rates, starting at 10.99 per cent.

You can avail a personal loan from Tata Capital through a simple online process with minimal documentation and an easy-to-meet eligibility criteria. Tata Capital has all the tools to help you check your eligibility and use the personal loan EMI calculator, and even apply for the personal loan online. As far as repayment is concerned, there are flexible repayment options with flexible tenure options of up to 6 years, thus letting you repay your personal loan EMIs as per your convenience.

What’s more, Tata Capital appreciates your financial behaviour to help you get a personal loan at the most competitive interest rates. No matter what your need for the funds is, personal loans are there to fund your diverse financing goals or to help you ease your tight financial situation.

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