Getting a low personal loan interest rate is a dream. It can help make the loan more affordable and easier to repay. So, if you think you can get a low interest personal loan right now, you can, but first you can learn about the five elements that influence personal loan interest rates. This article is going to help you understand what determines an interest rate and also the current personal loan interest rates, so dive in.
Introduction
We can never know when we may encounter an emergency or require additional funds. In such cases, we are fortunate to have the option of obtaining personal loans. There are numerous banks and financial institutions that offer the best personal loans interest rate these days, but selecting the right personal loan with perks can be time-consuming. There are now loan aggregation apps that can assist you get the finest personal loans in minutes without any problems.
Buddy Loan is one such loan aggregator app, where we offer you a wide range of personal loans from various banks and financial institutions. We can help you choose the best personal loan with affordable interest rates that offers you a number of benefits. Buddy Loan also provides a tool called Buddy Score that allows you to assess your credit score and loan eligibility.
Factors That Affect Personal Loan Interest Rates
For loans with low-interest rate, the lenders will look into many factors to consider, such as the background, profile, and type of loan applicant. Here are some of the critical deciding factors to overcome while availing a low personal loan interest rate–
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Income (passive/active) and Organisation:
The income or rental salary of the borrower plays a crucial factor for lenders when deciding to offer a personal loan—the bigger the income, the lower the interest rate. Here’s why! Personal loans with low-interest rates are disbursed once the bank is convinced that the individual earns a good income. Usually, salaried individuals have better chances of getting low-interest rates, more than self-employed as the latter’s income is not fixed. This is because the repayment is more secure when the individual is employed.
An individual with a job at a reputable company or large firm is more likely to get approved for a personal loan with low interest. This is because an employed individual is less likely to default on the loan repayment.
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Credit Score for lower-interests:
A lender always looks at your credit score to determine the borrower’s credibility. It signifies an individual’s capacity to repay the borrowed amount. It is a 3-digit numeric rank given by the Credit Bureau to individuals based on their repayment history. The higher the credit scores are, the better their chances of securing a personal loan with a low-interest rate. A credit score between 750 and 900 is considered ideal and safe by most lenders. This score becomes a deciding factor for banks and financial institutions to determine personal loan interest rates. This is because a good credit score signifies a good history of debt repayment.
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Association with lender:
Having a good relationship with one lender will be essential for establishing trust. When borrowing from one lender for a long period of time they will be able to understand your financial habits and have your financial records. A long relationship with a trusted lender will get you many attractive offers, especially the best personal loan interest rates. The approval process for the loan will also take a shorter amount of time as the lender will have all your necessary information.
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Economic factors:
The economic market at the time of application is also a very important factor that determines the interest rate of a personal loan. Interest rates tend to fall and rise with the growth and fall of the economy. With inflation there will be an increase of interest rates for personal loans whereas when the economy is going through a recession, the interest rates will be lower. The repo rate will also affect personal loan interest rate as it is the rate by which the lenders borrow from the RBI. To get the best out of your personal loan, you can opt to borrow at a time when the interest rate is low. So, keep your eyes on the market for the best rates!
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Financial history:
Your financial habit and history is the most important factor that determines the interest rate of your loan. With good repayment habits lenders are more likely to give you low interest loans. This is because an individual with a good repayment history will have low chances of defaulting a loan. In addition, having a history of irresponsible repayment, applying for numerous loans from different lenders in a short period will harm the borrower’s credit score.
Keeping these factors in mind will help you make good decisions while choosing the best loan plan for you. You can also check various EMI calculators before deciding on which lender to choose if you have various personal loan offers. If you are looking to get a loan, below is a compilation of various NBFCs and bank loan interest rates of the top financial institutions in India that are offering the lowest interest rates on personal loans.
Also Read: Best Instant Loan App For Self Employed: A Complete Guide
Personal loan interest rates of Top Banks and NBFCs
Banks and NBFCs offer different interest rates and repayment plans depending on the aforementioned factors. Some of these banks and their best personal loan interest rate are mentioned below:
| Bank Name | Interest Rate | Processing Fees | Loan Amount | EMI/1 lakh for 1 year (Rs.)
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| State Bank of India | 9.60% onwards | Up to 1.5% | Up to 20 lakhs | 8,773 | Apply Now |
| Central Bank of India | 9.85% onwards | Up to Rs. 500 | Up to 10 lakhs | 8,785 | Apply Now |
| Union Bank of India | 10.60% onwards | 0.50% | Up to 15 lakhs | 8,820 | Apply Now |
| Punjab National Bank | 8.90% onwards | Up to 1% | Up to 20 lakhs | 8,741 | Apply Now |
| Indian Bank | 9.20% onwards | Up to 1% | As per the applicant’s profile | 8,754 | Apply Now |
| Bank of India | 12.15% onwards | Up to 2% | Up to 10 lakhs | 8,892 | Apply Now |
| IDBI Bank | 9.50% onwards | Up to 1% | Up to 5 lakhs | 8,768 | Apply Now |
| Bank of Maharashtra | 8.90% onwards | Up to 1% | Up to 20 lakhs | 8,741 | Apply Now |
| UCO Bank | 8.45% onwards | Up to 1% | Up to 10 lakhs | 8,720 | Apply Now |
| HSBC Bank | 9.25% onwards | Up to 1% | Up to 30 lakhs | 8,757 | Apply Now |
| Kotak Mahindra Bank | 10.99% onwards | Up to 3% | Up to 15 lakhs | 8,838 | Apply Now |
| Bajaj Finserv | 11.00% onwards | Up to 3.85% | Up to 25 lakhs | 8,838 | Apply Now |
| Tata Capital | 10.99% onwards | Up to 2.75% | Up to 25 lakhs | 8,838 | Apply Now |
| Stash Fin | 11.99% onwards | Up to 10% | 1000 to 5 lakhs | 8,884 | Apply Now |
| Faircent | 12.00% onwards | Up to 8% | Up to 10 lakh | 8,885 | Apply Now |
| Kreditbee | 15.00% onwards | Up to 6% | 1000 to 4 lakhs | 9,026 | Apply Now |
| Yes Bank | 10.75% onwards | Up to 2.50% | Up to 40 lakh | 8,827 | Apply Now |
| HDFC Bank | 10.50% onwards | Up to 2.50% | Up to 40 lakh | 8,815 | Apply Now |
| MoneyTap | 13.00% onwards | Up to 2% | 3000 to 15 lakh | 8,932 | Apply Now |
| Fullerton India | 11.99% onwards | Up to 6% | Up to 30 lakh | 8,884 | Apply Now |
| Indiabulls | 13.99% onwards | Up to 3% | 1000 to 15 lakh | 8,978 | Apply Now |
| RBL Bank | 14.00% onwards | Up to 3.5 % | 1 lakh to 20 lakh | 8,979 | Apply Now |
| Muthoot Finance | 12.00% onwards | Up to 3.5% | 50,000 onwards | 8,885 | Apply Now |
| Money View | 15.96% onwards | Up to 8% | 5000 to 5 lakh | 9,071 | Apply Now |
| Early Salary | 18.00% onwards | Up to 2% | 5000 to 5 lakh | 9,071 | Apply Now |
| PaySense | 15.96% onwards | Up to 3% | 5000 to 5 lakh | 9,071 | Apply Now |
| Home Credit | 24.00% onwards | Up to 5% | Up to Rs. 5 lakh | 9,168 | Apply Now |
| CASHe | 33.00% onwards | Up to 3% | 6000 to 3 lakhs | 9,897 | Apply Now |
Note: The interest rates are subject to change, so visit the official website for updated rates.
From these banks and their interest rates you can choose to take a personal loan from any bank or loan aggregator that offers the best repayment option that suits you. Buddy loan is also a loan aggregator whose lenders offer an interest rate of 11.99%. Click here to learn more about the features and offers by Buddy Loan.
Getting a Personal Loan has Never been Easier. You can now Apply for a Personal Loan with the Following Easy Steps.
Apply for a Personal Loan at Low Interest Rates with these easy steps!
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Determine your eligibility
The minimum personal loan eligibility is:
– The applicant should be at least 21 years of age at the time of loan application
– The applicant must earn a minimum of Rs. 25,000 per month in net income.
– The applicant must have worked for the company for at least two years and at least one of those years in the current organisation.
- Employees working in private or public companies and central, state, and local bodies are eligible to apply.
- Should have completed a minimum of one year stay at the current residence.
The following step is to ensure all the requirements for low-interest personal loans are satisfied after the eligibility criterion has been met.
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Compare All Offers
While looking for a personal loan with low-interest rates, you must have details of the interest rates of every bank or institution in front of you. It is essential to review each bank’s website, understand the interest rates and processing costs, and conduct an informed comparison before selecting the best option. When a comparative analysis is done, you would stumble upon attractive offers and determine the best personal loan interest rates that suit your needs.
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Apply With a Known Lender
It is more likely to receive preferential interest rates from a bank or financial institution that you have made regular transactions and deposits with rather than from an unfamiliar financial organisation. The relationship that you have with the bank can lead to the bank giving discounts, offers, and loans with low-interest rates. Due to familiarity, trust is built between the financial organisation and the applicant, leading to better bank loan interest rates.
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Calculate your credit score
Calculating your credit score before applying for a loan is important as a credit score determines your credibility. The lesser the debts and loan defaults, the better your credit score and chances for a lower interest rate and higher loan amount. A credit score as high as 750 and above will improve your chances of getting a loan with low-interest rate. There are various ways by which you can calculate your credit score, you can get it from the official CIBIL website or get it for free from websites like Buddy Score. Maintain a healthy credit score by keeping track of all financial transactions. Regularly checking your score will also help to avoid errors in your credit report which can affect your future borrowing prospects.
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Leverage Work Credentials
For a lender, stable employment status is vital as it indicates whether you can pay back the loan amount on time. If you are employed by a renowned company and have a steady job, your chances of getting a personal loan with low interest are higher. As a result, you should benefit from their position and corporate reputation to get favourable interest rates.
What Determines A Personal Loan Interest Rates?
The rate of interest charged by banks and other financial institutions is calculated by considering various important factors –
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Credit Score
This score indicates your creditworthiness. The greater the credit score, the more favourable the interest rate. The minimum credit score needed to get approved for a personal loan varies depending on the lending banks or institutions’ rules.
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Principal Amount
A good repayment history will bring you the benefit of obtaining a larger amount of personal loans with minimum interest rates.
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Loan Tenure
A loan tenure also determines the interest and the EMI payable. If the repayment tenure is shorter you will pay a higher EMI but the interest rate will be lower as you will repay your debt much faster. However, if the tenure is longer, your EMI will be lower but the interest rate you will be paying will be higher.
Curious to know if you are eligible for a personal loan, get to know your credit score through our tool Buddy score.
Also Read: Good Credit Score But Still Rejected Loan? Top 10 Reasons For Loan Rejections
Methods to Calculate Personal Loan Interest Rate
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Flat Rate Method of Interest Calculation:
In this method, The initial principal amount is used to determine the personal loan interest rate, and the principal repaid is not considered. In this case, the interest rate is fixed for the duration of the loan—this method of interest calculation results in a higher EMI.
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Reducing Balance Method of Interest Calculation:
After each EMI payment in this scenario, the remaining loan balance is decreased. As a result, only the current loan amount is used to determine the interest for the following month. Here, interest is calculated on this decreasing loan amount rather than the total amount borrowed at the start. Therefore, the principal amount still due at the end of a specific time is used to determine the personal loan interest rate.
How to Calculate EMI on a Personal Loan?
There are many ways by which you can calculate the EMI for a personal loan. You can use various websites available online from banking and NBFC websites or you can calculate using the following formula.
The interest on a personal loan is calculated in the following manner:
EMI = [P x (R/100) x {1+(R/100)} ^N]/[{1+(R/100)} ^(N-1)]
Where,
EMI = equated monthly instalments
P = the principal amount borrowed
R = loan interest rate (monthly basis) = annual interest rate/12
N = loan tenure (in months)
Let us assume that a borrower borrows a sum of Rs. 7 lakhs at a rate of 12% for a tenure of 5 years, the interest for the 1st month will be calculated as follows:
(7, 00,000*0.12/12) =7,000
Points To Keep In Mind
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Make Repayment a Priority:
To get better rates on interest, it’s important to pay your credit card bill and other EMIs on time. You can negotiate better for a lower interest rate with a responsible credit history.
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Look for Deals and Offers:
Be updated about seasonal offers and schemes that banks introduce, especially during the festive season, which will promise lower interest rates on personal loans.
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Calculate Interest Carefully
Even though the interest rate is low, you may still be required to pay extra, mainly if you use a flat rate. Take into consideration the processing fee of each bank, which varies amongst banks.
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Customer Service of Banks
Opt banks and institutions that offer impressive customer service and regular assistance in loan sanctioning and repayment etc.
Also Read: Timely Repayment of Loan EMIs: Important Benefits At A Glance!
Conclusion
To summarise, a personal loan is one of the most hassle-free loans disbursed by banks and other financial entities. Suppose the lender is convinced of your repayment capacity after evaluating your credit scores, income level, employment history, and other factors. In that case, it is likely that you get good deals on interest rates. While the interest rates on personal loans may vary depending on the lender, it’s best recommended to keep an eye on offers, compare all the interest rates, leverage your employment status, and hold a good credit score, this will be able to secure you the best interest rates to achieve your financial goals. If you are looking to apply for a personal loan, you can use the Buddy Loan platform to be connected to reputable lenders who offer personal loans at affordable rates.
So why wait? Apply for a Personal Loan NOW!
Having any queries? Do reach us at info@buddyloan.com
