What Is Considered as the Best Interest Rate for Personal loan?
Aug 31,2021 OMLp2p Loans, Personal Loan, Digital Loan, Online Borrowing
Interest rates are probably the primary thing you consider when opting for any loan. The lower, the better, right? Though, the answer is not that easy.
Personal finance interest rates depend on varying factors and are normally subject to fluctuations. Besides, since the personal loans are unsecured in nature, interest rates can be on higher side when compared to home or auto loans. Let's take a look at what comprises a best interest rate.
What is the average interest rate for personal loan in India?
The average interest rate varies from 11% to 36%. However, the rates can differ subjected to lender's lending policy, customers financial history / cashflow, repayment capability, and several other factors.
Understanding fixed vs floating rates
For personal loan, there are two types of interest rates- fixed and floating. In the fixed interest rate loan, lender charges a constant interest rate throughout the loan tenure. Here, total interest payable remains fixed.
In case of floating interest rate loan, interest rates are usually lower at the start. But the lender can modify it as per the current repo rate, a lending benchmark announced by the Reserve Bank of India (RBI) from time to time. So, while customers personal loan EMI may remain smaller at first, the risk of paying higher instalments amounts in the future remains.
How to get personal financing at lower interest rates?
Before applying for personal finance, evaluate loan offers from multiple lenders / financial institutions. Look for seasonal or festive deals as well.
Besides, customers credit score plays an important role in securing a lower interest rate on personal finance. A credit score preferably over 750, is considered excellent score. The personal loan interest rates also depend on regular and amount of income, as the higher the income, the lower the chances of defaulting.
How to shortlist the best personal financing option?
While a lower interest rate is enticing, one should also consider the following factors before deciding a loan offer.
Many lenders / financial institutions levy a processing fee, ranging from a nominal Rs. 400 to about 6% of the disbursed amount. The processing fee is included in loan application process which adds to overall repayment amount.
Reading all related terms and conditions is critical before applying for any loan. It not only safeguards customer from any unseen charges but also benefits him understand his loan terms better.
Hidden charges can include advance payment / foreclosure charges, penalty on EMI defaults, loan cancellation charges, etc.
Ultimately, the interest rate applicable on personal loan depends on the lender / financial institution. Therefore, conduct thorough research on loan providers, considering current financial obligations, and keeping in mind the factors mentioned earlier before applying.
OMLp2p offers collateral-free personal financing starting at an attractive interest rate of 9.49%. Customer can plan repayment using EMI calculator by calculating EMIs and interest payable in advance.