If you have already applied for personal loans or in an application process, you would definitely accept that the first and foremost thing you consider is the interest rate provided by various banks. Yeah, when it comes to personal loans, you are provided with various interest rates by different banks. When you compare some of the more well-known public and private banks, you'll note that interest rates are based on a number of factors.
Furthermore, various banks have different conditions for providing personal loan interest rates. More to the point, there are some variables that influence personal loan interest rates, whether you are salaried or self-employed. However, if you are still in a personal loan process, read this article below to get the answers to all your questions. The top five factors that impact your personal loan interest rates are as follows:
If you are applying for personal loans, your salary is the first and foremost determining factor. Yeah, being an unsecured loan, you don't need to give the bank any kind of protection in a personal loan to make use of this loan. Thus, how can the bank trust you? Well, it can trust you on the basis of the revenue you are receiving. The more earnings you have, the more options you have to use the loan at lower interest rates. And, since you can easily repay the amount of the loan, the bank can count on you. It's important for the bank to trust you in order to give you a personal loan, and this can only be possible if your income is above the risk limit.
The status of your business is the next aspect that plays a crucial role in determining your personal loan interest rate. It's not easy for the bank or lenders to trust, as already mentioned, being an unsecured loan, so there are different criteria on the basis of which banks will give you this loan, and one of them is to know the status of your firm. In addition, the type of company you work with or partner with is very essential for personal loans to be used. Banks classify businesses into various categories, and the status of your company is determined by these categories.
The following are the categories:
- CAT A applies to the Top 1000 firms Multinational Companies (MNCs) are referred to as CAT B.
- CAT C stands for Smaller Companies.
- Smaller businesses with 100 staff are referred to by CAT D
If you fall into one of these categories, having a personal loan should be easy. The higher your category, the more likely you are to apply for a loan with a lower interest rate. However, if your business is a start-up and is not listed by the bank, you might be liable for a loan with higher interest rates. Employees of start-up companies may expect to get a personal loan with a high interest rate.
Banks follow any applicant's credit history/ CIBIL score before agreeing to offer some kind of loan. Many banks would not accept your profile if you have applied for a personal loan and your payment history is not up to date, and if they do, you will be offered a higher rate of interest. The higher your score is when it comes to the CIBIL score, the better it is for you. The CIBIL score varies from 0-900, and the score above 750 is considered to be used by personal loan banks. You may also expect a reduction of around .25% on your interest rate to take advantage of the personal loan if your score is above 800.
The type of relationship you have with your bank often influences your ability to secure a personal loan at the best rate of interest. If you have a pension or savings account, the bank is more likely to give you a personal loan at a lower interest rate or with a lower processing cost. Banks normally offer lower interest rates to those customers who maintain a successful relationship with the bank in order to retain their clients. To receive a personal loan, banks usually provide special interest rates to all of their valued customers, especially those who have credit cards or accounts with them. As a consequence, having a positive relationship with your bank will affect your interest rate when applying for a personal loan.
If you have a bank account for a long time, it is very clear that you are a valued bank customer and have maintained a good relationship. As a result, if you bargain with the bank on interest rates, fees, and other terms, you will certainly get the best offer. You can ask the bank for special deals based on your negotiating skills, and you can get the best personal loan deal possible.