How do you find the best personal loan interest rates when you need a loan for abroad study or any other financial requirement? Documents required for personal loans and eligibility play the most important role while applying.
A personal loan is a sum of money borrowed from a lender to help meet various financial requirements such as a vacation, higher education, and more. Typically, a personal loan is paid back with interest over a decided period through EMI or equated monthly instalments. If the loan is unsecured, the interest rates can go a little higher as opposed to a situation when collateral is involved.
Most banks offer an unsecured personal loan, wherein you can get up to Rs. 25 lakh loan in your bank account within a day of applying. The longest duration you can choose to pay back your borrowed amount is 60 months, while the interest rate depends on the lender.
Getting the Best Personal Loan Interest Rates
Interest rate is the amount charged by the lenders for using the loan amount. It is expressed as a percentage of the principal or the original amount borrowed. Personal loans that come with a lower interest rate are easier to pay back when compared to credit card debt. Most banks offer a personal loan at competitive interest rates that start at 8%. In addition, there are other charges, such as processing fees, EMI bounce charges, penal interest, and document/statement charges which borrowers have to bear.
Aspects That Influence the Personal Loan Interest Rate
While every borrower aims for the best personal loan interest rates, certain factors play a crucial role in this regard. Lenders decide the loan interest rate based on your –
- Income, wherein the higher your income, the lower is the interest rate on your loan, and the opposite is true if you have low and inconsistent income;
- Credit rating, which impacts loan approval and the interest rate;
- Debt to income ratio, or the ratio of all your old debt payments divided by your total income; a higher ratio indicates that there is a debt burden on the borrower’s side, and this can cause the lender to charge a higher interest rate on the loan;
- Loan amount, wherein the more money you borrow, the higher is the interest and total sum payable;
- Repayment term, wherein opting for a shorter tenure for repayment will result in higher EMIs but can help reduce the total interest over the long-term;
- Employers’ status, as in the more renowned the organization that you work for is, the lower the interest rate is on your loan;
- Relationship with the lender, wherein building a financial relationship with one lender can fetch attractive personal loan rates through mutual trust;
- History of defaults, wherein if the lender finds gaps in your credit profile, they may either charge a very high-interest rate or will reject your loan application;
Documents required for a personal loan
Documents that are required to verify your profile as a borrower include –
- Identification proof
- Government-issued document for proving your address
- Recent passport-size photos of the applicant
- Bank statement of previous three months
- Latest salary slips
Bajaj Finserv also helps you check the eligibility for a personal loan through their eligibility calculator. To qualify, you need to fill in the requisite details, and also your age and credit score.
When applying for a personal loan, the interest rates are a huge factor to consider since they affect your EMI payments and overall amount. To get the best personal loan interest rates, you need to know the various factors that affect this component. In-depth knowledge and awareness can enable you to work out details with your lender and strike a deal for a personal loan.