Personal Loan Interest Rates

Latest Personal Loan Interest Rates 2022

About Personal Loan Interest Rates

Key points about Personal Loan Interest Rates:

1. A fixed amount is to be paid every month to the bank of your loan amount
2. You can now get easy and quick disbursal of loan within 24 hours also depending on your loan amount and your bank record
3. Always maintain your bank accounts, because banks still consider your accounts as your stability to bear the loan amount
4. Never try to take an amount of loan which you think will not be possible to repay to the bank in that fixed time period
5. Must maintain your documents means your profile is what speaks for yourself, so try not to mess with your papers while submitting them to the bank
6. Most of the rejections for a Personal Loan are done based on the documents that you provide, and your current location also matters a lot while opting for a loan
7. Try to keep your records as simple as possible. Provide genuine documents
8. CIBIL Score plays a vital role in this type of loan. By tracking your credit history, the bank decides whether you have financial stability or not.

What is the best way to get a Personal Loan @ Lowest Rate of Interest?

Eligibility Criteria for Personal Loan:

1. CIBIL Score: It is the summary of your credit history. The score is derived using a CIBIL report, which is also known as (CIR) Credit Information Report. All the previous payments regarding loans and credit card history get checked through that.
2. Salary: The bank decides the loan amount based on your net pay. So, make sure to think wisely while considering the amount of loan that you want to take.
3. Location: It is yet another primary concern while opting for a loan. You can get a loan only if there is a branch of the bank near your current living location.
4. Tenure of the loan: All banks have a different tenancy for giving credit. So you need to decide for how long you want a Personal Loan.
5. Age: A person between the age of 21-60 years can avail of a Personal Loan. The condition applies to both salaried and self-employed people.
6. Company’s Profile: For salaried people, it means that your company’s background is checked whether it comes under the list of banks or not. For self-employed people, the age of the company is taken into consideration along with how much profit it makes on an annual basis.
7. Special Discounts: It is not always necessary that the bank in which you have your current salary account is going to offer you the best loan interest rate. So try to explore more in this case which bank has to provide what. There might be other banks as well who can give you some other exciting and attractive loan schemes. Don’t get into a trap.
8. Processing Fee: Last but not least, all banks charge you some rate of processing fee while sanctioning your loan amount.
9. Capability: Only apply for the amount which you can repay to the bank quickly.
10. Avoid Multiple Loans: When you take multiple loans (means more than one loan from the same bank or different banks), then the bank thinks that you might not be able to repay the amount of being sanctioned loan timely. Make sure that you are under no multiple loan schemes to avoid rejection of your loan.
11. Avoid Reapplication: Several banks do not provide credit to applicants who have applied earlier in the past six months. Try to keep a gap of at least six months for reapplying to take a Personal Loan.
12. Stability: Always ensure that you must have the capability of repaying the money to the bank for which you need to be more stable if you are working in a corporate sector and in case of self-employed people your company must earn a handsome amount of profit and must be sustainable in the market.
13. Loan Amount: Only apply for the amount you think you are eligible for.
14. Eligibility: You can check eligibility by clicking on this link: Personal Loan Eligibility

Factors Affecting Personal Loan Interest Rates

• CIBIL Score: Your CIBIL score depicts your creditworthiness and lenders use it as a means of checking your credit history and capability of repaying the said loan on time. A high credit score helps you in getting a low-interest rate.
• Level of Income: After credit score, lenders need validation for your level of income as it indicates your capability of repaying your loan and often gets you a lower rate of interest if your income level is high.
• Credit Utilization Ratio: This is the ratio between the amount of credit that is available to you and the amount of credit you have used. Usually, a credit utilization ratio of up to 30% is considered a good ratio as it indicates a higher repayment capacity.
• Fixed Obligation to Income Ratio (FOIR): This is the ratio between the already existing EMI amounts and credit card bills to your total income. It helps to determine how much income you have to repay the further loan that you’re applying for. FOIR should be maintained as low as possible at least less than 50% to get a good interest rate.
• Multiple Loan Applications: You should not apply for multiple loans at once as it negatively impacts your credit score and makes it harder for you to get a loan at a low interest rate.
• Relationship with the Bank: If you’re an already existing customer with the bank having a Savings account or a loan, it impacts the rate of interest that is going to be charged from you as compared to any new customer.

Floating Interest Rates vs Fixed Interest Rates – Which is better?

If you choose a personal loan with a fixed interest rate, you’ll be charged the same rate of interest throughout the repayment tenure of the loan.

The variable or floating interest rate is linked to the MCLR or Marginal Cost of Lending Rate, thus the rate of interest changes as and when the MCLR fluctuates.

In choosing the fixed rate option, you know exactly how much you’ll have to pay each time. Therefore, those who wish to plan their finances should choose this option.

However, you can opt for a floating/variable interest rate as it has the benefit that you’ll have to pay a lesser amount in case MCLR drops. 

Total Cumulative Interest Calculation

The annual interest on a loan is calculated using the formula:

I = P x (R/100)

Such that, 

• I = interest payable, 
• P = Principal (loan outstanding) and 
• R = Rate of Interest (annual percentage rate)

While you can apply the above formula to a one-year personal loan, a multi-year loan may have a different principal each year as the loan is repaid. To calculate the total cumulative interest of a personal loan, add the additional interest amount each year. Suppose you want to avoid having to perform such complex calculations. In that case, it is best to use an EMI calculator, which will instantly provide you with information such as the total interest payable on your home loan.

Tips to get a low PL Interest Rate

A personal loan’s interest rate is typically lower if the lender perceives you to be financially responsible. The following are some options for obtaining a low-interest rate on your loan:

• Keep a high credit score and a clean credit history.
• Make sure you have no outstanding debt, i.e. a credit utilisation ratio of 30% or less.
• Apply for a personal loan with a lender with whom you have previously worked.
• Choose a secured personal loan, such as a loan against shares, NSC, KVP, LIC, or similar.

While the suggestions above are a favourable starting spot for getting a lower interest rate on your loan, a low-interest rate is not guaranteed because various factors influence the loan interest rate.

Ways to decrease total interest payout

While it may not be feasible to achieve the lowest interest rate for your loan, there are three ways to reduce the total interest payable on your loan:

• Choosing a shorter term – Higher individual EMIs but the lower genuine interest paid
• Part prepayment/foreclosure – Reduces the loan principal, resulting in more down interest payment.
• Choosing a smaller loan amount – Lowering the loan principal results in lower total interest payment.

Benefits of Prepayment

• Full PrePayment

When done at the correct moment, a complete prepayment can save a borrower the most money. This relieves you of your loan obligation and saves you money on interest payments, which would otherwise be debited from your account. This will allow you to focus even more on your future. The money saved from a full prepayment can be invested wisely for a better future.

• Part PrePayment

A percentage of the outstanding loan sum is paid as part of the part payment. It will lower the outstanding principal as well as the EMI and interest payments.

But How Will You Accumulate the Prepayment Sum?

If you’re serious about it, use the Personal Loan EMI Calculator regularly. You can use the calculator to examine the repayment estimate at various periods throughout time. To make a full prepayment, you must be very careful with your money. Set a monthly savings goal and work toward it by reducing wasteful spending.Even if you only want to make a partial payment, follow the same procedure. With the calculator’s guidance, all of this can be planned and accomplished properly. But, to make a successful prepayment, where should you place your money? Your money might be split between fixed deposits, recurring deposits, and even mutual funds.

Compare Latest Personal Loan Interest Rates

Points to Remember 

While choosing a personal loan with a low rate of interest, you should consider the following points: 

• Processing Fee: Lenders charge a one-time charge called the processing fee, which increases the loan cost. The processing fee is also important while selecting a personal loan and not only the Rate of Interest. 
• Prepay Charges: Some lenders may charge pre-payment or preclosure charges if you repay the entire loan amount before the end of the repayment loan tenure. Keep in mind to check whether your lender charges any pre-payment charge or not. 
• Customer Service: Make sure the lender that you have chosen for your loan offers good customer service to the end consumer. Before applying for a personal loan, you should keep in mind the customer service options and how to contact them.
• Eligibility Criteria: While the lender offers personal loans at low rates of interest, you should always check the eligibility criteria of the lender and whether your ‘e eligible for the loan or not.
• Loan Disbursal: If you have to take a personal loan for any emergency, it is important to make sure that the lender gives the loan disbursal quickly. Many leading banks and financial institutions provide the loan disbursal within a matter of seconds. 
• Other Charges: Some banks and financial institutions may charge you a slightly higher rate of interest, you may be able to save on the overall cost of the loan if the processing fee, default charges, pre-payment fee, Loan Cancellation Charges, etc., are low. Therefore, keep in mind the different offers from various lenders to avail of the best offer.
• Discounts: Although the bank/financial institution may have specified a high interest rate, you can try to negotiate with the bank for the lowest interest rate. Many-a-times, lenders will give a discount to existing customers and to those who have maintained a healthy relationship with them.
• Offers: Several banks and financial institutions provide the best offers on their financial products during the festive season. 

Benefits of Personal Loan

Look at the following table that will give you an idea about how banks decide your loan application procedure.