Personal loans are becoming very popular with people across India. There is no need to offer any security to get a personal loan. Hence, you can get a personal loan from banks or NBFCs if you meet the criteria they set to decide if you are eligible for the loan. You are free to use the loan amount as per your needs, and the lender cannot stop you from using the money as you want.
Before you get a personal loan, you must know all about interest on personal loans. The rate of interest (ROI) that the lender will charge will directly impact the EMI you must pay. Generally, the lower the ROI, the better the loan is for you. You must also factor in the personal loan processing fee when you opt for a loan, as it will also impact the cost of getting a loan.
Read on to learn more about personal loan processing fees and interest on personal loans.
Interest on Personal Loan
Interest on personal loans is the cost you must pay on the loan amount during the entire loan period. The lender gives you this interest rate when you apply for a personal loan. The EMI for the loan is based on this interest rate. So, you must check the interest on personal loans before you select a lender, as, in most cases, it will not change during the tenure of the loan. Do not decide in haste, as you might have to pay higher interest rates, which will increase the total cost of the loan for you.
Factors that Affect the Interest on a Personal Loan
Banks and NBFCs decide on interest on personal loans based on certain factors. These factors can vary depending on the lender, but most consider the following aspects:
- Credit score: Banks and NBFCs will consider your credit score to decide on the interest rate for a personal loan. The higher your credit score, the lower your interest rate will be.
- Income: You must have a stable source of income to repay the EMIs on time. The higher your income, the lower the rate of interest will be.
- Type of work: The interest rate on personal loans can vary based on the nature of your work. Most lenders offer lower interest rates to people who get a salary every month as compared to business owners.
- Age: Lenders will offer better interest rates if you are in your 20s or 30s. Interest rates can be higher if you are in your late 50s.
How to Get Low Interest on Personal Loans?
You can follow the tips shared here to be eligible to get low interest on personal loans:
- Good credit score: Most lenders will check your CIBIL score before they offer you a personal loan. If your CIBIL score exceeds 750, you will get low interest on a personal loan.
- Compare offers: Many banks and NBFCs offer low interest on personal loans. You need to compare offers from different lenders to see who offers the lowest interest rates.
- Negotiate: This old method still works quite well. When approaching a bank or NBFC for a loan, you must negotiate for a lower interest rate. Many lenders offer low interest rates to customers who have had an account with them for a while.
- Pay EMIs: You must pay all your EMIs and credit card bills on time. This track record will help the lender know more about your payment capacity. They can thus offer you a better deal on your loan.
Fixed Interest Rate vs. Floating Interest Rate
This is another vital factor to consider when applying for a personal loan. Most lenders offer two types of interest rates, i.e., fixed or floating.
When you opt for a fixed rate, the interest rate will not change during the tenure of the loan. Hence, you know your EMI amount for the entire loan duration. But if there is a drop in the interest rate, you will not get the benefit.
On the other hand, a floating interest rate is also known as a flexible rate. This interest rate can change per the policy of the lender or RBI. If there is a fall in the interest rate, your EMI will reduce; if there is an increase in the interest rate, your EMI will increase.
So, you must decide only after comparing the interest rate options.
Personal Loan Eligibility
Banks and NBFCs consider various factors to decide if you are eligible for a loan. Some factors can vary across lenders. A few of the vital factors are: –
- Age: Your age must be more than 18 years but less than 60 years at the time of application.
- Income: Based on the lender, your monthly income should generally be above Rs. 15,000 to get a personal loan.
- Work: Most banks and NBFCs will offer a loan only if you get a salary every month. Though, some lenders also offer personal loans to business owners.
- Experience: You must have a work experience of more than one year.
- Location: If you live in a metro city, your chances of getting a higher loan amount are better than those in a tier-II or tier-III city.
- Credit score: Most lenders require a credit score of over 750 for a personal loan. Though, some lenders also accept a credit score of 700+.
Personal Loan Processing Fee
The personal loan processing fee is a one-time fee that lenders levy on the customer taking the loan. This fee starts at 0.5% of the loan amount and can go up to 3.5% of the loan amount. You can pay the personal loan processing fee directly to the lender or have the amount debited from the loan amount. You must check this fee before taking a loan, or it can increase your loan cost.
A personal loan is a good option for you when you need money for an urgent need. Conduct thorough research before you take a loan to get the best deal. Make sure to check out personal loans from Piramal Finance, as they offer the best deals and low interest on personal loans.