Apply For A Personal Loan Online With Minimum Documentation
Get A Personal Loan Starting From As Low As Rs.1,000 To A Maximum Of Rs.20 Lakh Through Credmudra!
When in need of urgent funds apply for a personal loan and get a sizable sum of money from reputed financial institutions and NBFCs. You can get these funds transferred directly to your bank account and use them without any end-to-end usage restriction. However, you must consider the personal loan interest rates while applying for credit. This first-hand information will help you choose the best lender offering the most flexible deal per your requirements.
Personal Loan Interest Rates
The table below illustrates the current personal loan interest rates offered by several banks and NBFCs:
| LENDING INSTITUTION | APPLICABLE RATE OF INTEREST |
|---|---|
| mPokket | 0% - 48.0% per annum |
| MoneyTap | 1.08% per month onward |
| CASHe | 2.50% per month |
| Axis Bank | 10.49% - 22.0% per annum |
| IDFC FIRST Bank | 10.49% - 36.0% per annum |
| HDFC Bank | 10.50% - 24.0% per annum |
| ICICI Bank | 10.75% - 19.0% per annum |
| Bajaj Finance | 10.99% per annum onward |
| Kotak Mahindra Bank | 11.0% - 39.0% per annum |
Types Of Interest Rates On Personal Loan
Usually, financial institutions offer two types of personal loan interest rates. You must know the difference between both the types as they can affect the affordability of the credit instrument significantly.
Here are the two types of interest rates applicable to personal loans:
- Fixed interest ratesThis type of interest rate remains fixed throughout the loan repayment tenure. This means that if the lender charges 5% interest on a personal loan at the start of the loan term, it will remain unchanged despite the fluctuations in the market.
- Variable interest ratesThis interest type gets affected by the changes in the market situations. If you are a prospective borrower, you must choose the interest type carefully to avoid financial burden in the long run.
Aspects That Affect Personal Loan Interest Rates
In order to secure the lowest personal loan interest rate, you must know the factors on which the rates depend upon:
- Income:If you have a high monthly income, banks and NBFCs will charge a lower interest rate. This is because lenders consider borrowers with a higher monthly income as more reliable than those with low income. A person with a low monthly income has a higher chance of facing a financial crisis and defaulting on a credit instrument.
- Repayment History:Your repayment history allows the lending intuition to determine your ability to repay the loan on time. Banks will charge a lower interest rate on personal loans if you have a good repayment history with no records of defaulting.
- Lender and Borrower Relationship: If you have built and maintained a good relationship with a financial institution, you are more likely to get a lower interest rate. Due to your relationship with the lender, they will consider you as a low-risk applicant and sanction a personal loan with a lower interest rate.
- Debt-to-Income Ratio: The amount of ongoing debts you have compared to your current monthly income is known as the debt-to-income ratio. If you have a high debt-to-income ratio, you will be charged a higher interest rate on a personal loan. This is because a person with a considerable amount of debt has a higher chance of defaulting on any credit line.
- Credit Score and Report: If you have a decent credit score you will be offered the best personal loan interest rates. This is because, a good credit report, free from defaults and missed payments, indicates excellent financial management.
Apply For A Personal Loan Online With Minimal Documentation
How Does Credit Rating Influence Personal Loan Interest Rates?
Prospective borrowers with an excellent or decent credit score can be offered as low as 13.5% as personal loan interest rates due to their creditworthiness. However, those with poor or average credit scores will have to pay higher interest rates.
The table below illustrates the average personal loan interest rates as per the credit score ranges:
| CREDIT SCORE RANGE | AVERAGE PERSONAL LOAN INTEREST RATE |
|---|---|
| 720 to 850 | 10.73% to 12.50% |
| 690 to 719 | 13.50% to 15.50% |
| 630 to 689 | 17.80% to 19.90% |
| 300 to 629 | 28.50% to 32.00% |
However, you must keep in mind that these figures are just an average. The rate of interest that the lender charges will depend on all the factors mentioned above.
Top 4 Easy Ways To Grab Personal Loans At Lower Interest Rates
Here are four effective tips that you can practise in order to get personal loans at low-interest rates:
Tip 1: Get Your Credit Score Soaring
In order to determine your creditworthiness, a lender will always check your credit score. Hence, if you have a poor credit score, try everything possible to boost the score and ensure the lowest personal loan interest rates.
Here are some of the easiest ways to boost your credit score:
- Reducing the credit utilisation ratio
- Paying the monthly instalments on time
- Avoiding multiple hard enquiries at the same time
- Maintaining a good mixture of secured and unsecured credit instruments
- Reporting the errors in the credit report, and more.
Tip 2: Weigh up Different Loan Offers
In order to get hold of the lowest interest rates, it is essential to do thorough market research. Check all the offers extended by different lending partners and settle down for the one that offers the most flexible terms.
In this regard, you can use a personal loan EMI calculator to compare different lenders. This online tool works on three variables (principal, rate of interest and tenure) and displays the EMI for the values you feed in.
Tip 3: Resolve Your Indebtedness
Your repayment capacity is among the first things that the bank or NBFC will check while sanctioning your loan application. In case you have a high debt-to-income ratio, you will be charged a higher rate of interest. This is because the risks of defaulting increase for such applications.
However, if you plan and repay a certain amount of your current debt, you can negotiate with the lender for offering a lower interest rate. You can start off with this by preparing a list of all the debts you are serving currently and noting down their respective rates of interest. Then, begin repaying the debt with the highest interest rates. Consequently, your overall outstanding debt will also reduce.
Tip 4: Don’t Hesitate to Choose a Different Lender
In case repaying the current outstanding debt is not a viable option, you can opt for the balance transfer facility. This facility allows you to transfer the remaining personal loan amount to a new lender offering a lower interest rate or more flexible terms.
With all this information in hand, you can now apply for this unsecured credit option and get the lowest personal loan interest rates. However, you must also make sure to repay the monthly instalments on time. This is because missing out on even a single EMI can negatively reduce your CIBIL score and lower the chances of getting loan approvals in the long run.
Apply For A Personal Loan Online With Minimal Documentation
FAQs On Personal Loan
2. What happens if I fail to repay one EMI for a personal loan?
Even the slightest delay in repaying the monthly instalment will negatively affect your credit score. This will indicate poor repayment behaviour, reducing the chances of loan approvals in the long run. In order to reduce these complications, it is best to set a reminder and keep the money ready to pay before the EMI payment date.
3. Which is better, fixed or floating personal loan interest rate?
The rate of interest remains fixed throughout the repayment tenure in case of a fixed rate. On the other hand, the rate of interest keeps changing with the fluctuations in the market in the case of a floating interest rate. Willing borrowers should keep this thing in mind and choose the option that best suits their needs.
