A personal loan is an excellent instrument of credit. It does not require any collateral against the loan amount and is available at attractive rates of interest. Financial requirements can come up in your life, and they can be easily mitigated by making smart decisions. The financial requirements can either be related to an urgency leading to a short-term crisis or because of a new financial milestone that you want to achieve in your life. Whatever be the reason for the financial requirement, personal loan finance can take care of it. Financial institutions, like Fullerton India, provide personal loans at great rates of interest and they make them readily available. All you need is to visit their website and apply using their application portal.
The amount of loan needed depends on your requirement. However, the rate of interest of personal loan charged on the amount depends on a lot of factors. Keep these factors in mind the next time you apply for a personal loan. Rae if interest is a very important aspect of personal loan finance and even a small difference in the rate of interest can make a substantial difference in the final interest amount that you have to pay. Financial institutions are ready to give relaxations in the rates of interest only if you have taken care of some of the important aspects of the application. In this article, we will discuss four factors that can impact your loan interest rate.
4 Factors that May Impact your Personal Loan Interest Rate
Salary is one of the most important factors when it comes to taking a personal loan. Your salary is a direct indicator of your earning power and hence, a higher salary gives a higher level of confidence in you. Financial institutions just want to reduce the risk associated with loan instruments. In the case of default by a borrower, they have to bear the entire burn as this is an unsecured loan. Hence, a borrower with a higher salary will be a preferred option.
Due to the higher level of confidence in a borrower with a higher salary, financial institutions are ready to give a lower rate of interest. Generally, a rate of interest between 16 to 20 percentage is offered to people with salaries less than INR 50,000 while a rate of interest in the range of 14 to 16 percentage is offered to people with salaries greater than INR 50,000. If the salary is even higher, then the rate of interest can go as low as 12 percentages.
Your credit score is like a testimony to your financial viability. A credit score is a quantified metric to judge whether a borrower is in a financial condition to repay the loan. It also depicts the financial history of a client and comprehensively entails all the loans and debts the borrower has taken and how well he or she has fared in returning those loans.
Hence, financial institutions prefer borrowers to a higher credit score. The preferred range of credit scores is between 700 and 900. Having a higher credit score gives you better power to negotiate with the lender. The financial institutions are ready to offer a better rate of interest to a person with a higher credit score.
The credibility of your employer is also very important. The organization you work in and the time for which you have been working at that organization are some of the very important factors that may affect the rate of interest. For example, financial institutions are more likely to give a better rate of interest to an employee of a trusted and old company, as there are higher chances of the employee to sustain the salary for a longer time.
This may also be one of the factors affecting your rate of interest. If you are an old customer of the financial institution and have used their products before, you can always use your loyalty to points to get a better deal with personal loan finance. Financial institutions, to retain their loyal customers, do offer a better rate of interest to old customers.
These points will help you in getting a better deal from your lender the next time you go for a personal loan application.