How to get the Best Personal Loan Interest Rates?

Are you looking for funds at low interest rates? If yes, personal loans are the best tool for managing your financial needs. You can incur expenses from travelling with your partner or your child's education expenses to booking a wedding and managing finances during a healthcare emergency. No financial institution or bank asks about the reasons for taking a loan. You can use it as per your requirements. This blog will support you in getting lowinterest personal loans so you can repay them conveniently.

Personal Loan Interest Rates Overview

A personal loan is a financial product that can be availed at a time of need. Depending on your need, various banks offer loans at varied interest rates from 8.75 to 49.5 percent. You can compare personal loan interest rates before applying online or offline.

How to Get the Lowest Interest Rate on a Personal Loan?

We are discussing various quick tips that help to get the lowest personal loan interest rate.

Credit score- The high score signifies your creditworthiness. Financial institutions often provide low-interest rates for a person with a high credit score. A score under 750 depicts that you must improve the chances of getting a personal loan at low interest increased with a credit score above 750.
Regular repayments- If you have missed the loan or credit card payment, your credit score will be affected. The lenders often evaluate repayment history before giving the best personal loan interest rates.
Keep monitoring offers- Certain banks provide loans at low-interest rates for a limited period during the festive season. You can grab the offer and apply for a personal loan.
Compare rates- Before applying for loans, you must compare interest rates offered by banks and other financial institutions.
Negotiate with the lender- You can negotiate with the bank to provide loans at a low-interest rate. Also, you can submit a written request for the same.

Factors that Affect Personal Loan Interest Rates

Various factors affect personal loan interest rates in India. These are discussed below:

Employer details- If you work for reputed companies, then banks offer personal loans at low-interest rates.
Income- The lenders consider income while fixing the interest rate. A person with a high income is offered a loan at a low-interest rate, while low-income individuals are provided with the same at high rates.
Employment nature- The loan providers provide varied interest rates depending if you are salaried or self-employed.
Age- Age also plays an important role in personal loan minimum interest rate. People near retirement age are offered loans at high-interest rates.
Relation with the lender- The bank's customer is offered a low-interest rate based on their relationship.

Fixed Interest Rates vs Floating Interest Rates – Which is better?

There are two kinds of interest rates: fixed and floating. The selection of it depends on your choice. However, there are certain differences between the two:

The interest rate remains the same in the case of a fixed interest rate, whereas the rate fluctuates as per the market in a floating interest rate.
The EMI remains the same throughout the period in the fixed one, while EMI changes in the other one.
In the fixed interest rate, you might give a prepayment charge for repaying your loan, while there is no need for a prepayment charge in a floating one.
The fixed interest rate is connected with MCLR (Marginal cost of funds-based lending rate), while the floating one is not connected to MCLR.

You can easily calculate interest through apersonal loan interest calculator if you opt for a fixed interest rate and plan your finances. In the case of a floating interest rate, the repayment amount gets reduced due to the low-interest rate in the market.

What is meant by Reducing Interest Rates on Personal Loan?

Interest is evaluated on the loan amount if the personal loan is taken at a flat interest rate. In contrast, a loan taken on reducing the interest rate is calculated on the outstanding loan amount. Hence, when taking the lowest personal loan interest rate, consider the measures below.

Processing fee- Financial institutions charge a processing fee that can increase the loan cost. Hence, you must check with the bank about the processing fee.
Pre-closure- Some banks charge pre-closure charges if you repay the whole amount before tenure. So, it would help if you talked to the bank about the same.
Eligibility criteria- You must check with the bank if you meet the eligibility criteria regarding age and income for a personal loan.
Customer service- You must check how promptly the lender solves your query.
Loan disbursal time- Also, compare the time taken that the bank takes to transfer funds to your account.
Other charges- You must also consider other charges levied by the bank, such as prepayment fees, processing fees, default charges, EMI bounce charges, loan cancellation charges, swap charges, stamp duty, instrument return charges and other hidden charges.
Discounts- Keep watch on personal loan interest rates and negotiate with your bank accordingly. You can get a discount based on your relationship.

Personal Loan Interest Rate Example

Generally, personal loan interest rates vary between 8.75 to 49.5 percent. The rate depends on income, credit score, repayment duration and loan amount. The formula to calculate EMI = [PRX(1+R)^N]/[(1+R)^N-1]. P stands for the loan amount, R is the interest rate, and N is the number of monthly instalments

Let me discuss one example: Mr Sharma, a 35-year doctor, wants to apply for a personal loan of 10 lakh rupees for a period of 36 months at an expected 14 percent interest rate. Now, he can use a personal loan interest rate calculator for calculating EMIs. He can enter the details in the formula and calculate EMIs.

What are some of the other fees levied by lenders?

Financial institutions levy certain other fees:

Processing fee- It is the amount used for the application process.
Verification charges- The amount charged for verifying background.
GST charges
Late payment fees- This is the amount charged on late payments of EMIs.
Prepayment fees- The fees charged on prepaying the entire amount before the duration
Foreclosure fees- It is the amount that the bank charges for closing the loan before time.

Hence, you are advised to compare the personal loan interest rates.

How is my prepayment fee calculated?

Two methods can analyse the prepayment amount:

The percentage of the total amount to be repaid
The percentage of the principal amount outstanding at prepayment time.

Conclusion on Personal Loan Interest Rates

So, I have discussed various tips and things to consider before applying for a less interest personal loan. You are required to maintain a credit score of 750 and more. You can enquire and compare with various banks and financial institutions to get loans at low-interest rates. Also, monitor the current personal loan interest rate and negotiate it with your lender. You can get low interest according to your relationship with the current bank. Also, they prefer to take loans during the festive season, as many financial institutions provide loans at low-interest rates. Furthermore, you must consider other charges levied by the bank and calculate EMIs accordingly. Follow these simple tips to apply for a personal loan at low-interest rates.

FAQs on Personal loan Interest Rates

How do I get the best interest rate on a loan?

If you have a credit score of more than 750 and have good relations with the lending bank, you can get low personal lowinterest rates in banks.

How to get the lowest interest rate on a Personal Loan?

It would help to have a good CIBIL score and repayment history, compare interest with lenders, watch out for special discount offers, and have a good relationship with the bank. These tips will help to get lowinterest personal loans.

What is the average interest rate on Personal Loans?

The average personal loan interest rate varies between 10.5 to 24 percent. The interest rates depend on bank to bank.

What is the lowest interest rate available on Personal Loans?

The bank offers different personal loan interest depending on income, credit score, repayment history and age.

Which bank has the lowest interest rate on a Personal Loan?

The public banks are giving low-interest rates. Financial institutions such as Bank of India, Bank of Maharashtra and SBI offer low personal loan interest rates in India.

What is the current interest rate available on Personal Loans?

The current personal loan interest rate offered by various financial institutions is 10.49 percent. You can compare it with various banks, depending on credit score, repayment history, age, employment type and other factors.

How does my income determine my interest rate?

The income signifies the capacity to repay the loan. The high income depicts that you are capable enough to pay the loan timely, while low income shows a higher risk. Hence, lenders often evaluate the interest rate on the income. High income means a low-interest rate, while low income means a high-interest rate.