4 Important factors that affect personal loan interest rate in India

If you have ever applied for personal loans or are in the process of getting one, then you surely will agree on the fact the first and the most important factor that you consider is the Interest rate offered on these loans by different lenders. Yes, when it comes to online personal loans, the rate of interest varies across lenders and NBFCs. So, before you apply, make sure that you do not forget to cross-check and compare the rate of interest offered on it. Given below are the certain factors that affect the interest rate on an unsecured loan.

1. Your credit score - A credit score is one of the most important factors that show how well you have performed in the past while making the payments on your previous loans and credit cards. A credit score is a three-digit number that ranges between 300 and 900. If you have a higher credit score that means you are eligible to get the loan at a lower rate of interest. Generally, a credit score of 750 and above is considered good for online personal loans. Remember, if your credit score declines, the rate of interest will also increase.

2. Your net monthly income - Lenders also look at your net monthly income to evaluate whether you will be pay on time on time or not. If you have a higher income, you are on a safer bet. As, if your income is higher, your affordability also increases and so the chances of repaying the loan well on time. So, if you have a higher income, the lender is willing to lend you as you have better affordability.

3. Your company's reputation - If you are working with a reputed organization or MNC, then you can get a good deal on your loan. The reason being, employees of a reputed organization are considered more stable and responsible for repaying EMIs on time. Besides this, the nature of your employment also impacts the interest rate on your personal loans. The rate of interest might vary for self-employed or salaried individuals. Borrowers who are nearing their retirement age might be asked to pay a higher rate.

4. Existing relationship with your bank - When you apply for personal loans online, the rate of interest also depends on the kind of relationship that you have with your lender. If you have maintained a good relationship with them, they are more likely to give you a better deal on your loan or may lower or waive off your processing fee.

Conclusion

The above-mentioned factors are considered important as they affect the interest rate on your loan. So, it is important to keep a check on them before applying for it. You should always cross-check and compare the rate of interest offered by the multiple lenders to discover the best deal on your loan.