Factors that impact the Personal Loan Interest RateLifestyle and standard of living in urban cities have changed over the years. Most of the salaried individuals and start-up companies find it hard to survive & bear the expenses that come with improved living standards. A smart way out to fulfil your dreams and needs is to apply for a personal loan. It may sound simple nowadays to get a loan with instant loan apps, but many do hesitate thinking about the additional interest rate levied on each loan.
The interest rate can be fixed or fluctuating, depending upon the loan type and the financial firm or money lender offering the loan. A personal loan being an unsecured loan starts with a low-interest rate which depends on the applicant’s eligibility criteria.
Therefore, if you are in the process of availing a personal loan, here are some key factors that can affect your personal loan interest rates:
- Benefits of High Income:
Before planning a personal loan, your income is the most significant factor that determines the interest rate on loans. Borrowers falling in the high-income group are more likely to fully repay their loan amount without any delay than those with lower income. Lenders offer personal loans quite easily to individuals with high income, as lenders are very sure of the repayment ability of the borrower.
- Good Credit Score:
It is an accepted fact that your loan gets approved only when the credit score reflects your financial performance in the good books of lenders. Each timely repayment against loans or clearance of debts will improve and increase your credit score. While delayed and faulty payments will hover a negative impact on your overall financial performance, affecting interest rates.
- Repayment Status:
Having a faulty reputation or a bad loan repayment history can impact youroverall financial status and credit score.A bad repayment history means paying a high-interest rate on a personal loan or might not even get the loan approval. You need to make payments on time to maintain a strong financial history and increase your credit status with no failures to repay the loans.
- Relationship with the Lender:
If you are an existing customer with years of loyal relationship with a lender, then you can negotiate for the personal loan interest rate. To retain their customers, lenders usually offer attractive interest rates to those customers who maintain a good relationship for the long term.
- Your Organization Status:
Majority customers may not be aware that working with a renowned company can play a crucial role in bringing down the interest rate. A personal loan is open to salaried and self-employed individuals. The salaried or private sector are the most chosen individuals for personal loans, for a sole reason that they possess job security which ensures timely payments of loans.
Hence, if you are interested in the low-interest rate for a personal loan, manage your finances well in a way that gives a low-interest rate and easy loan approval.