Apply For Personal Loan

Loan EMI Calculator

What Factors are considered to calculate the Interest Rate?

What Factors are considered to calculate the Interest Rate?

An interest rate is one factor that makes people think twice about whether to take a loan or not. This is because a personal loan amount when due for repayment becomes heavier with the interest rate added to it. However, interest on a loan is unavoidable and every borrower applying for a personal loan will have to bear the interest in EMIs. It is a commission that lenders levy in exchange for offering the desired loan amount during a fixed tenure. Interest on a loan is risk-bearing compensation for the lender.

The lender usually charges a high-interest rate on personal loans to ensure their money is safe against potential risks. Different financial firms and NBFCs in India charge a different percentage of interest on personal loans. So, it is a wise thing to compare the interest rate on financial websites and go for the best one to afford EMIs. Also, borrowers can make use of the EMI calculator to get clarity on the percentage of interest and tenure applied to the personal loan amount. Accordingly, decide a suitable EMI that is easy to repay monthly.

Whether you are applying for a personal loan for the first time or have multiple personal loans running, it is advisable to consider the factors to calculate the interest rate:

State of the Economy

In a country with a higher economical growth, many industries increase their borrowing capacity to meet various short-term and long-term objectives. Even the citizens increase their spending power in buying new essential gadgets and vehicles. However, when there is a drop-down in the economy, the demand for a personal loan for buying products decreases. This in turn affects the rate of interest on personal loans.

Government Borrowing

Government expenditure results in Fiscal deficit. This increases the government revenue, influences demand for money, and affects the prevailing interest rate.

Global Trends

Integration of the Indian economy with the global economy shifts the interest rate to support the foreign exchange rate. In order to attract global capital, the interest rates in India also rise and remain in sync with the global trends.

Credit Score

Borrower’s credit score is also one influencing factor for interest rates on a personal loan. If you have a good credit score, you have a chance of getting a personal loan at competitive interest rates. A low credit score creates a high-risk situation for the lender to approve the loan.

Loan Tenure

This a common factor influencing an interest rate. The shorter the tenure that is for 6 months or 1 year, the higher will be the interest, and the longer the loan tenure of 10 years or more, the lesser will be the interest rate as regular EMIs will be paid for a long time.

Use the interest rate calculator to easily calculate the interest in no time or go the manual way using the below simple interest formula:

Principal Loan Amount X Interest Rate X Total Number of Years = Interest
INR 2,00,000 x 5% x 5 = 50,000 is the interest for 5 years
 

SimplyCash

SimplyCash powered by Hero FinCorp is an instant personal loan app providing cash loans of upto INR 1,50,000 for both salaried and self-employed individuals. Driven by technology and fuelled by innovation, SimplyCash solves instant cash requirements of customers in just a few simple clicks without any physical documentation or meeting. The mobile app is available to users through all popular Android play stores like Google play store, Samsung store, Xiaomi store etc. With one of the most widespread presence, SimplyCash currently offers its services in over 90 major locations in India. Known for a seamless process, instant loan disbursal and transparent pricing - SimplyCash truly lives upto the expectations of being a 'Hero' product.  

Note: SimplyCash is a duly registered trademark and is a loan product offered, managed and operated by Hero FinCorp. Hero FinCorp Limited is a Non-Banking Financial Company registered under the provisions of Reserve Bank of India ("RBI") and is in the business of finance and lending.

Customers also read this

Accepted Banks:

ICICI BANK LTD HDFC BANK LTD IDBI BANK STATE BANK OF INDIA PUNJAB NATIONAL BANK YES BANK INDUSIND BANK KOTAK MAHINDRA BANK LTD

IDFC FIRST BANK LTD AXIS BANK BANK OF BARODA TAMILNAD MERCANTILE BANK LTD INDIAN OVERSEAS BANK INDIAN BANK RBL BANK LTD DEUTSCHE BANK AG CITY UNION BANK LTD FEDERAL BANK SOUTH INDIAN BANK STANDARD CHARTERED BANK CANARA BANK KARNATAKA BANK LTD CITI BANK BANDHAN BANK UNION BANK OF INDIA DCB BANK LTD DBS BANK INDIA LTD THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD DEUTSCHE BANK UCO BANK

Secured
Safe & Secure

SimplyCash is managed and operated by Hero FinCorp Limited, and it follows high data and system security standards.

View Details

SimplyCash Insights

Install App Instant Small Cash Loan App Online
Useful Links

Copyrights @ 2021 All Rights Reserved Powered by HeroFinCorp Ltd.