Personal loans have been the go-to credit tool for any unplanned or planned financial need. From financing wedding expenses or clearing a credit card due, personal loans offer the desired flexibility. As an unsecured loan, this loan doesn’t require any collateral to be submitted for approval.
Although the personal loan interest rates are higher due to its no collateral requirement, several criteria determine a borrower’s interest rates.
In this comprehensive coverage, we look into some of the unseen factors influencing your loan interest rate.
Factors that affect your interest rate
1. Your repayment history
Repayment history plays a prominent role in determining interest rates. A lender can check the punctuality of a borrower’s repayment schedules through credit scores or CIBIL scores. A borrower who is disciplined in his repayment schedule without any defaults has a higher chance of getting personal loans approved at lower interest rates.
2. Credit score
The credit score or CIBIL scores are a reflection of borrower’s credit management. A healthy credit score signifies that the applicant is disciplined in borrowing as well as paying off his dues or repayments. It is an important factor considered by most lenders before approving loans. A credit score of 750 and above is deemed to be healthy. Applicants with higher credit scores have a higher chance of getting personal loans approved at lower interest rates.
3. Relationship with the lender
If you are a current customer with the lender, your loyalty and existing relationship with the lenders may open doors for lower interest rates.
4. Income
As personal loans are unsecured, the applicant’s income lays a vital benchmark on their repayment capacity. Thus a salaried individual with a higher income is more likely to receive personal loans at lower interest rates than an applicant with lower income.
5. The reputation of your employer
Your employer’s status in the market also plays a vital role in determining your loan interest rate. The more reputed and established your employer is, the higher are the chance of getting your loans approved at lower interest rates. Since personal loans are unsecured loans, your employer’s reputation is considered convergent with your career stability and hence repayment capacity.
6. Tenure and Loan amount
The tenure and loan amount for which the applicant has applied also determines the personal loan interest rates. The higher the loan amount and tenure, the lower are the personal loan interest rates.
Personal loans in current day scenario
With the government stating the importance of social distancing to curb the pandemic, making a physical presence at your lender’s office might seem difficult.
Several lenders have introduced hassle-free loan application measures to reduce the risk while not compromising on a customer’s needs. They are:
- Online loan applications
- Implementing digital KYC verification for loan approval
- Bespoke loan apps
While these have been the general trends, lenders like Fullerton India have taken customer services to a higher notch. Salaried applicants who wish to avail of Fullerton India personal loans online can now do so through the Fullerton India Instaloan App for quick loans. The InstaLoan App smoothens the loan application process through digital KYC procedures and quicker disbursals.
Final thoughts
Personal loans are an essential helping hand during an immediate financial crisis. Although the loan’s nature makes the interest rate on personal loans higher than other loans, the factors mentioned above make an applicant eligible for a lower interest rate.
With social distancing playing a vital role in the current scenario, lenders like Fullerton India provide hassle-free, physical contactless Fullerton India personal loans online at feasible interest rates.