With quick disbursal, no security and zero restriction on funds end usage, personal loan is exceptionally advantageous for mitigating your instant monetary shortfalls. Personal loan interest rate can range anywhere from 10.25 percent to 24 percent p.a., which differs widely from one bank to another. This disparity in personal loan rate is owing to various parameters factored in by lenders when assessing your application.

Check out 4 important parameters that can affect your personal loan eligibility and interest rate:

  • Credit score

Your credit score is one of the most important parameters factored in by lenders when assessing your personal loan application. If your credit score is 750 and above, you are considered creditworthy and have higher personal loan approval chances at a lower interest rate. However, if your credit score is below 750, you hold lower chances of securing a personal loan. Even if you avail a personal loan with a lower score, the charged personal loan interest rate will be comparatively higher.

As the requirement for personal loan is unannounced in nature, reviewing your credit score right before submitting the loan application may not be of much help. Forming a strong credit score takes a lot of time and periodical review of your report is the only medium to keep a thorough check on your credit discrepancies and behavior. Doing this will also endow you adequate time to take righteous steps to rectify mistakes, which will enhance your chances of availing a personal loan at lower rate. 

  • Employer’s reputation

If you are an employee working in a reputed company, you may be considered a suitable applicant for meeting your EMI repayments and may be offered lower rates. However, if you work in an average or below average company, lenders may be hesitant at offering you lower personal loan rates. Additionally, lenders are even hesitant at lending self-employed individuals.

Apart from this, your employment nature may even impact your personal loan rate. Usually, salaried are offered a lower personal loan rate than self-employed. Amongst the salaried, PSUs and government employees are highly favored, followed by private sector employees. Amongst the self-employed, doctors and chartered accountants are preferred by the lenders. 

  • Income

If your income is high, then you are considered a safer bet for the lenders as you have lower chances to default on your personal loan and thus may be provided a lower rate. However, if you earn a lower income, you may be considered highly risky by lenders and to protect their potential risk, you may be offered a higher rate on personal loan.

  • Relation with the bank

Many of you open a savings account and tend to open a recurring deposit or fixed deposit with the same bank to build a loyal customer base. Owing to this type of loyalty, you may manage to share a good informal relationship with the bank, which may fetch you a lower personal loan rate whenever any requirement for loan arises. 

Ending note

As every lender has their own process of computing the personal loan interest rate, make sure to compare amongst various personal loan offers before submitting the final application. One of the prudent ways of doing this is approaching the online financial market, which can fetch you a suitable deal based on your income, credit score and numerous eligibility criteria.

Once you have selected the lender, use the personal loan EMI calculator to compute your EMI based on your repayment capacity. The personal loan calculator can also be used for comparing various personal loan deals offered by different lenders to zero on the suitable one. 

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