Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs SUPPORT
Loans For You
Loans for Business
Investment
Insurance
Apply
Quick Links for loans
Quick Links for Insurance
Investment
Offers Quick Pay
Back

Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure
Know More
Back

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required
Know More
Menu  
 
Apply Now

Tata Capital > Blog > Personal Use Loan > What Are The Types Of Personal Loan Interest Rates?

Personal Use Loan

What Are The Types Of Personal Loan Interest Rates?

What Are The Types Of Personal Loan Interest Rates?

People take personal loans for various purposes, which justifies the interest rate. Many require personal loans because bigger expenses have become a financial burden for the common person. A typical personal loan interest rate ranges from 10.50% to 24% p.a., different on the loan terms and conditions and other factors.

To avail the lowest rate of interest, see a few points below:

Keep a timely payment track record

The main deciding factor of the interest rate in the personal loan is the credit score a person has, which is decided by the timely and the lapsed payments done by the person. If the payment is always on time, the credit score is higher, and the interest rate will be low and vice versa.

Compare interest rates

One should always check the interest rates of other banks and NBFCs and then go for the desired interest rate in the bank that provides the same.

Talk to the relationship manager 

Whenever you go to apply for a loan in the bank, always first try the bank in which one has their account and talk to the relationship manager. The bank can lower the interest rate if the savings or current account is well maintained.

Lower your interest on offers

At the time of festivities, banks and financial institutions often offer special interest rates for a limited time. One can even apply for a loan during this time to avail of the lower interest benefits.

Improve your credit score

One needs to always check their credit score and credit history before applying for any loan, as the credit score determines the eligibility and rate of interest. If one has a credit score above 750, they are charged with the lowest interest rate, while people with a credit score near 600-650 are charged with a higher interest rate. Thus, improving the credit score can get a lower rate of interest.

Other Factors that influence Personal Loan Interest Rates

Income: Income determines the interest rate, as a higher income provides a lower interest rate. In comparison, a lower income provides a higher rate of interest as the threat to the bank for default in case of lower income is higher than that of the higher income.

Employment Type: Banks prefer salaried professionals over the business owner while providing a better interest rate.

Age: The applicant's age is also a major factor in the loan sanction department, where people below 35 are given a lower interest rate than those above 35.

Types of interest rates

Fixed rate of interest and Floating rate of interest

Fixed-rate of interest

As the name suggests, a fixed interest rate is constant throughout the loan period and is most beneficial to ascertaining the EMI repayments. The fixed interest rates are higher than that of flexible interest as they must remain constant even in the event of inflation and are not linked to MCLR (Marginal Cost of Funds Based Lending Rate). And even if one forecloses the loan, they will be charged foreclosure charges.

Floating rate of interest 

As the name suggests, a floating rate of interest changes as per the repo rate of RBI and thus is variable. Banks do not charge customers if they decide to foreclose the loan in case of floating interest rate as it is linked to MCLR (Marginal Cost of Funds Based Lending Rate). A floating interest rate can lower your repayment amount when the interest rate is low.

To avail of the floating rate of interest, one must also keep in mind the other charges which are levied minimum in case of fixed interest rate, such as - 

Processing Fee

Every bank and NBFC charges processing fees on loans, varying from 0.5% to 2.50% of the total loan amount.

Miscellaneous Charges 

There are various other charges such as Cancellation Charges, Foreclosure charges, EMI default charges, Stamp duty charges, Duplicate statement issuance charges and other charges which can burn a hole in one's pocket. These charges can be omitted with better planning and options, saving a lot of money.

Pre-Closure Fees

If you pay your loan before the tenure, certain financial institutions can charge for the due period as pre-closure charges, where a portion of the outstanding loan amount is charged to the person before closing the loan account. Some banks have these charges while some do not; one should enquire before getting a loan.

To Sum Up

Thus, the above factors drive the interest rate of a personal loan and keeping them in mind will enable a person to avail lower rate of interest.

Apply for Personal Loan
Disclaimer

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Other Websites

Important Information

Investor Information

Visit us on:,Visit us on: www.tatacapitalmoneyfy.com,www.tatacapitalmoneyfy.com

Our Private Equity Funds

Amalgamated Companies

Top Branches

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Policies, Codes & Other Documents

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.