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What Is an Ideal Personal Loan Interest Rate?

Over the past few years, the rising popularity of a personal loan as an important credit choice has enhanced owing to its list of benefits, features, and constant enhancement in expenditures. Distinct lenders present in the market provide a lower interest rate on a personal loan, which is the main reason why there’s an increase in the number of borrowers for a personal loan. Presently, the personal loan interest rate ranges anywhere between 10 per cent per annum and 26 per cent per annum. In the case, you are one of those looking out to avail a personal loan from the State Bank of India then note that the SBI personal loan interest rate starts from 11 per cent per annum and to take an informed decision of whether to avail a personal loan, you can take the help of an online SBI personal loan EMI calculator

While getting a personal loan, you should always check for a personal loan’s minimal rate of interest as it directly affects your finances. While placing an application for a personal loan, you should ensure to keep a watch on three important parameters which involve interest rate, loan repayment tenure and loan proceeds. To avoid any kind of default or delay in repayment, you should always use the online personal calculator to plan out your EMIs in advance. 

Using an online personal loan EMI calculator will even assist you in getting the lowest personal loan rate. A personal loan can be utilised for education, weddings, travel, renovation, etc. You should keep the below points in mind to get a good personal loan interest rate. 

Lender – 

There are distinct lenders in the market and selecting the correct one can be tough for you. As a borrower of a loan, you must compare all lenders in the market to get the lowest personal loan rate of interest. Before placing for a personal loan, you always approach the lender’s official site and check all current deals and offers to get a personal loan at a minimal rate of interest. 

Also Check: SBI Personal Loan Interest Rate

Credit score – 

A credit score is one of the main parameters that impact your interest rate when opting for a personal loan. You must always ensure to maintain a higher score to avail a loan at the lowest personal loan rate. A score of 750 and above is looked upon as excellent for taking up a personal loan. A lower score can make it tough for you as a borrower to get a loan at a lower rate of interest. A credit score thus is one of the crucial eligibility parameters for a personal loan. Besides this, you require meeting the eligibility parameter like income, age, and work experience. 

Credit report details – 

Credit report details are provided by the credit ratings agencies like Equifax, TransUnion CIBIL, CRIF Highmark and Experian. Such credit agencies are responsible for endowing credit info to you as a borrower. Your credit report details include credit scores, credit inquiries, credit card balances, missed payments and others. It assists lenders in better understanding your whole credit history as well as checking your credibility. To avail a lower rate of interest, you must ensure to hold a strong credit report. 

Loan proceeds – 

Loan amount refers to the amount that is borrowed by you as a borrower for a predetermined repayment tenure and interest rate. Higher loan proceeds infer higher risk for the lender. For higher loan proceeds, a lender may levy a higher rate of interest. You must always take up loan proceeds for a predefined repayment tenure and interest rate. Higher loan proceeds refer to the amount i.e., borrowed by a borrower for a predetermined repayment tenure and interest rate. A higher loan proceeds mean a higher risk for the lender. For higher loan proceeds, a lender may levy a heavy interest rate. You must always opt for loan proceeds according to your need as it results in default payment. Using the online EMI calculator, you can plan out your personal loan thoroughly in advance. 

Loan repayment tenure – 

Being a smart borrower, you should check all the crucial factors like loan proceeds, interest rate, and repayment tenure at the convenience of your home. For a higher repayment tenure, a lender tends to charge a higher interest rate. You must select the repayment period based on your requirement for a loan. 

Debt to income (DTI) ratio – 

The debt-to-income ratio or DTI ratio represents the ratio between the money you owe and the money you earn. If you hold a higher DTI ratio, the lender may levy a higher interest rate. The debt-to-income ratio reveals if you as a borrower can avail a new loan and whether you would be able to make the loan repayment on time by the due date. Hence, it is crucial for you to maintain a lower DTI or debt-to-income ratio. 

Security or collateral – 

There are basically two kinds of personal loans i.e., unsecured and secured personal loans. When a lender provides a secured personal loan, then the borrower must pledge the personal assets as collateral as a savings account, deposit certificate, or any other kind of asset. In the case of any secured loan type, the upper loan limit is basically higher than the unsecured personal loan. Usually, a personal loan is an unsecured credit option where you do not require to pledge any asset as security or collateral. 

Frequently asked questions – 

What’s the average personal loan interest rate?

The personal loan rate of interest differs slightly depending on your profile as a borrower based on parameters like income, credit score, previous payment history and others. However, the interest rate begins from as less as 10 per cent per annum. 

Is a 10 per cent rate of interest high for a personal loan?

No, a 10 per cent rate of interest is looked upon as a good beginning point for a personal loan

How much can you borrow through a personal loan?

The personal loan proceeds range anywhere between Rs 50,000 and Rs 40 lakh.

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