Interest rates are probably the first thing you consider when opting for a personal loan. The lower, the better, right? However, the answer is not that simple.
Personal finance interest rates depend on varying factors and are typically subject to fluctuations. Besides, since the loans aren’t secured, interest rates can be higher when compared to home or auto loans. So let’s take a look at what comprises a good interest rate.
What is the average personal loan interest rate in India?
The average interest rate ranges from 12% to 24%. However, the rates can differ depending on a lender’s lending policy, your financial history, repayment capability, and several other factors.
Understanding fixed vs floating rates
For personal loan, there are two rates- fixed and floating. In the fixed interest rate loan, your lender charges a constant rate throughout your loan tenure. Here, your total interest payable remains fixed.
In floating interest rates, your rates are usually lower initially. But the lender can revise it as per the repo rate, a lending benchmark from the Reserve Bank of India (RBI). So, while your personal loan EMI may remain smaller at first, you run the risk of paying higher instalments amounts in the future.
How to get lower interest rates on personal financing?
Before applying for personal finance, compare loan offers from multiple lenders. You can look for seasonal or festive deals as well.
Besides, your credit score plays a vital role in securing a good interest rate on personal finance. A higher credit score, preferably over 750, is considered good. The personal loan interest rates also depend on your monthly income, as the higher the income, the lower your chances of defaulting.
Additional Read: Why Have Personal Loan Interest Rates Dropped So Low?
How to decide the best personal financing option?
While a lower interest rate is appealing, you should also consider the following factors before choosing a loan offer.
Many lenders levy a processing fee, ranging from a nominal Rs. 500 to about 6% of the loan amount. The processing fee involved in your loan application process ultimately adds to your overall repayment amount.
Reading the terms and conditions is vital before applying for a loan. It not only safeguards you from any hidden charges but also helps you understand your loan terms better.
Hidden charges can include prepayment/foreclosure charges, penalty on EMI defaults, loan cancellation charges, etc. With Tata Capital, you can pre-pay part of your loan amount any time after 6 months from taking the loan without any additional charges.
Additional Read: Factors affecting personal loan interest rates
The bottom line
Ultimately, the interest rate applicable on your loan depends on the lender. Therefore, conduct thorough research on loan providers, consider your financial obligations, and keep in mind the factors mentioned above before applying.
Your friendly neighbourhood financier Tata Capital offers collateral-free personal financing starting at an attractive interest rate of 10.99%. Plan your repayment with our loan EMI calculator by calculating your EMIs and interest payable in advance.
Enjoy relaxed personal loan eligibility terms, quick processing, swift disbursals, and minimal documentation requirements with us.
So check out our website to apply now!