What Factors Affect your Personal Loans Interest Rates?
Posted by poonam dambare on October 1st, 2018
What Factors Affect your Personal Loans Interest Rates?
The living cost has been consistently on the rise and a person often find it difficult to manage everything on their own; and sometimes fall in the state where the financial needs and demands have to be met through the lending hands of either of their close relatives, friends or any lending agency. However, when the other sources of the financial resolution get closed, the last hope for the help comes in the form of the lending agencies, which offer a person with the personal loans to cover their urgent needs and demands.
Personal Loans are unsecured Loans
The personal loans are the unsecured loans, thus offering a notion that they are not secured by any asset or security, which needs to be pledged to the banks. Thus, the personal loans come with the higher rates of interest rates. But are you aware of the fact that these personal loans rates of interest can be tweaked and negotiable? Perhaps, many of us are unaware of the negotiation, which can be done from your bank, while you opt for the personal loans. In the same way, there are several factors which affect your personal loans interest rates.
While, the personal loans for all the banks vary from 12% to 24% depending on various factors, which will be discussed in this section, there are several factors, which can help you save interest by lowering your interest rates. Determining the factors, which are going to affect your personal loans, is the first thing before you apply for the personal loans. Let’s take a deep dive into all of those:
1. Your Credibility
The most important factor in the decision of the Personal Loans interest rates is the credibility of the person. Your credit history is the one, which decides the interest rates of the personal loans. The lower is the credit score of yours, the more is the chance for the loan to go default and thus the banks charge heavy interest rates. While the higher Credit Score indicates you are trustworthy and have the needed trust to pay back the money borrowed by the banks.
The Credit Score is the history of your past repayment history. In fact, the Credit Score is decided by the Credit calculation agency CIBIL, which is calculated on the basis of two important aspects:
Repayment of credit card bills
Repayment of existing loans and past repayments of loans
Always remember that the shaky and low CIBIL Score reflects the bad repayment behavior of yours and this imbibes a sense of less confidence among the lenders for the borrowers. The chances are that with a score of more than 800, you might get a reduction of around 0.25% on your personal loans. Thus, the better is the CIBIL Score, the more is the benefit you can have.
Tips for improving your Credibility: Your credibility is not built in a night, and thus you just can’t build your credibility in a single day. It’s the things, which needs long-term repayment behavior of yours. If you are not in need of personal loans at this moment of time, better be prepared for the unseen future and get yourself prepared. Take a credit card and use it (of course, responsibility!) and make the payment well on time for the bills incurred. If you have any existing loans, pay the EMIs on time, and never delay it. All these steps can surely help you in the improvement of the credibility and can surely improve your score towards the 900 CIBIL Score (which is the maximum score!). Improve your CIBIL Score to enjoy the lowest interest rates on your personal loans!
2. Your Income
Simply, more is your income; more is your repayment capability. Thus, more is the chances with the chances to recover their money from your (since personal loans are unsecured loans). Thus, more is the chance that the loan offered to you will not go to default. The banks usually charge higher rates of interest in order to incur the risk they are taking with you in personal loans. Since their money is in the safe hands, the interest rates go lower. High-income borrowers are always a safer bet.
There’s a slab (a predicated slab), which states that if your salary falls in the particular slab, the interest varies. Even, there are banks, which often hesitate in lending your personal loans, if your salary falls into a slab of below 30k (this is where Deals of loan can help you!). The more is the salary slab you fall in, the lower is the interest rates, and you will be charged at your personal loans. A person falling into the slab of 30k-50k will be charged higher than a person falling into the salary slab of 50k-1 lac and so on.
Always remember the fact that the higher income means lower interest rates!
Tips for improving your Income: There’s no such tip, which we can offer you in this regard. It’s the professional aspects and you can consider it better than us! Increase in the income allows you to live comfortably and happy. It will allow you with the healthy hands, and who knows, with the increase in income you never need any personal loans! So, keep on progressing in your professional life and keep on improving your salary. The living expenses are increasing with each passing day, and you should remain on par with the living cost!
3. Your Organization’s Reputation
While, many of those have never wondered, that the reputation of the organization can also play a part in the interest rates of personal loans; it’s the bitter truth, that yes, of course, it plays a deciding role in your personal loans interest rates. The more renowned and stable your organization is, the lower is the interest rates of your personal loans. Any particular reason behind this theory? Yes, in fact, banks perceive that the stable and reputed organization’s employees have a more stable and secured career ahead and thus less is the chance of loans going default. The more is the brand of your organization in the market; the lower will be your personal loans interest rates. So, the next time, you are thinking to switch the company, keep in mind that the bigger is the brand, the more is the advantages associated with your personal life, too.
Tips to cover this aspect: Never mind, if your organization is not that well reputed. But, a well-reputed organization allows you with the more stable job and better professional life. You can build a better future, with a reputed organization and are also entitles to several remunerations and benefits, which are harder to get in a small organization. Sine, a well-reputed organization offers you several other benefits, outside the company, always keep your spirits high and look towards the entry into the more reputed organization. With the improved pay scale and a better professional life, you never know, there’s no such need for a personal loan!
4. Job History
In fact, Job history is also one factor, which decided a lot in the Personal Loans application to be approved or not! The unstable job history indicates the unstable income, which is a sign that you may not pay back well on time and cannot your EMIs on time. Since personal loans are the unsecured loans, things might turn into your favor if you have an unstable job history. If you frequently change your jobs and your field of job, it brings a suspicion in the minds of the banks over your unstable income and earning along with playback capability. Some banks, even hesitate to lend you if you are new to the job.
Tips to cover this Job History: While, the frequent job change is never recommended in case, even if you don’t require any loans; you must have stability in mind over your profession. Be stable in the job, as it offers several other benefits besides lowering the rate of your personal loan of interest. The stable job allows you to build a better career and gain expertise in the field of work, you are in. The more is the experience with the time; the better is the chance of progress to a better position in any organization. With frequent changing of Job Field, you will be entering into the organization as the beginner and might also hamper your progress in career. So, look towards the job stability to reap several benefits.
5. Your relationship with the bank
How good is your relationship with the bank? Are you the new customer of the bank or have been the esteemed customer of the bank for years. Of you have been to the bank numerous occasions and bank representative know you very well, it all helps you in getting a good deal from your bank. It’s the interpersonal relationship, which paves for the lower Personal Loans interest rates for you. Everything counts! Your transaction details, your communication with the banks and all other aspects play an important role in the decision of the interest rates for your personal loans from your bank. Always remember that the healthy relationship of your can lower your interest rate by around 0.5% to 1%. A healthy relationship most often entails you to the personal loans much below at the advertised rates.
Tips to improve your relationship: Be an account holder in a bank for the longest time. A healthy visit and enquiring for other offerings by the bank and availing it offers a better chance for you to improve your relationship with the bank. In fact, no bank would like to lose its customers, to another competitive bank. Thus, they would like to remain connected with you. If you know someone, who is a part of the bank, having a better relationship can also boost your chance for an improved personal loan offer.
Also, we would like you to remain connected with other banks on what are their offerings on personal loans. At the same of negotiating with the bank over your personal loan’s rate of interest, you can also furnish the best deals as offered by other banks to your bank and can ask for the better deal than the other competitive bank. However, the chances are very slim that any other bank, will offer you a better deal than the bank, you are having an account with!
Have an understating on factors
Having an understating on how all above mentioned 5 factors affect your Personal Loans interest rates, can be very helpful in getting a good deal from your bank. All those above 5 factors collectively and accumulatively can help you in getting a better deal on your personal loans, during the most crunch time of your financial crisis. Understand all the factors mentioned above in detail and take out some serious steps, which needs to be done to improve your overall image in front of the banks, which surely can come to good use in the future.
Since the Personal Loans are Unsecured Loans, the banks and other lending agencies hesitate to offer you with the best deals, but it’s your image which can turn the tide in your favor for sure. Some other factors like rising in inflation and government’s decision to change the monetary policies might also affect the Personal Loans interest rates, but since they are beyond our control, we should pay attention at the things, which can be managed by us.
There are several Loan Services Companies, which arrange for the better deals, and contacting them for the personal loans and asking for a good deal, can be somewhat helpful in getting a personal loan with an attractive rate of interest! Better be prepared for any unforeseen future and crisis and try to improve your factors, which is not helpful in only personal loans, but with a variety of other loan types!