Insights to Getting the Best Personal Loan Interest Rate
A personal loan is your way to go to accomplish your personal needs. Be it buying a house, financing a marriage, planning a foreign trip, or making a down payment, a personal loan is the best fit. You can meet your requirements and at the same time pay the debt in equitable instalments. It doesn’t cause any financial distress and helps you in making smart financial choices.
But, what bothers most people is the personal loan interest rate that they are charged. Sometimes interest rates can be high and paying them every month can be stressful. Interest rates vary from bank to bank. They depend on a lot of factors like the current market scenario, your credit score, loan history, etc.
This article is a complete dedication to letting you know more about personal loans, their features and benefits, and the right strategy to get the best personal loan interest rates.
Personal loan: Meaning and significance
A personal loan is a type of loan that helps you to cover your requirements like buying a house, making a down payment, or financing your child’s higher education. The lender in return charges you with a personal loan interest rate for a set period. You are bound to repay the loan within that period. Different banks charge different interest rates. They depend on your credentials and the current market trend.
You can apply for a personal loan both in online and offline mode, depending on your preference. In online mode, the approval period and the disbursal period is less as compared to the offline mode. You also have the freedom to choose the type of loan, the loan amount, and the mode of repayment according to your suitability.
As you have a rough knowledge of personal loans, let’s now find out some of their benefits.
Here are some of the striking features and benefits of choosing a personal loan:
- Approval period:
Banks approve the loan within a short period to minimise complications and delays. The period of approval for a personal loan is less than three days in most cases. However, the period can even be reduced if you have a good credit score and a healthy loan history. The approval period in online mode is quite fast as compared to the offline mode.
- Rate of interest:
Banks often charge you a low rate of interest to make sure that you can easily repay the loan amount without any hassle. Personal loan interest rates also vary from bank to bank. They are dependent on your loan history and track record. In India, most banks charge an interest rate of about 8 per cent to 25 per cent per annum for a personal loan.
- Tenure of repayment:
The tenure of repayment is also reasonable. It gives you ample time to manage your finances. It varies from bank to bank. It is somewhere between the range of 12 months to 84 months. The average period to repay the loan will be 12 months to 60 months, but some banks extend this period to 84 months.
- Collateral:
Since personal loans are also called unsecured loans, there is no requirement for collateral or any form of security deposit. Banks don’t ask you for a guarantee. This feature suits those who don’t have property, shares, or any assets to pledge to get a loan.
- Processing fees:
Some banks charge a processing fee in addition to the personal loan interest rate. However, the processing fee is minimal in most cases to decrease your financial distress, whereas some banks don’t even charge a single penny for processing fees.
What are some ways to get the best personal loan interest rates?
There are multiple ways through which you can get the best personal loan rate of interest and they are:
- Comparing different interest rates:
Besides checking for what interest rates your bank provides, check for different personal loan interest rates provided by other lending institutions. Even if you are satisfied with what your bank charges, you must look for all offers available in the market. You should compare all the interest rates to get a rough knowledge of the market and then assess the best for you. You can also use a personal loan interest calculator to calculate different offers and see what suits you the best.
- Improving your credit score:
A credit score plays a massive role in deciding your personal loan interest rate, your loan amount, and the loan tenure. So, if you have a good credit score, it builds a sense of trust between you and your lender. It also helps you get an appealing offer.
- Knowing about different interest rates:
There are two very popular types of personal loan interest rates:
- Fixed interest rate
- Floating interest rate
A fixed interest rate is one in which the interest rate is rigid throughout the tenure. It is calculated directly on your principal amount. But, in a floating rate of interest, the interest rates keep varying according to the market rates.
If you are uncomfortable with the personal loan interest rate charges by your lender and you predict that the interest rate is going to decrease in the coming period, you can switch to a floating rate of interest. But, if you are comfortable with what you are paying, you can prefer a fixed rate.
Wrapping it up:
The rate of interest is a key factor according to which you decide whether or not you are going to go for the loan. A personal loan interest rate is a dynamic subject, so one needs to understand the way it is determined. You have to make sure that you compare different offers, clear your loan records, and improve your credit score to get a better interest rate.
In case you loved this article and you want to read more on personal loans, financing goals, and investment schemes, you can click on Piramal Finance.