You need money urgently to meet a big-ticket expense and you are short of funds. What would you do? You will look at alternate sources of financing. The easiest way to do it would be to swipe your credit card. Stop. Can you repay the amount within the credit period of 45 days? If your answer is yes, go ahead and your problem is solved. What if your answer is no? Then the question of interest comes into the picture. You will have to pay interest at 2-2.5% per month on the outstanding balance till you repay in full. That works out to 24-30% interest on an annual basis which is huge. Now consider a personal loan. If you were to take a personal loan from LoanTap you would have to shell out 18% per annum. So, compared to a credit card, a personal loan is cheaper by quite a bit. To be sure that this is the best deal you will have to compare the rates in the market and negotiate for the best rate possible. After all, every rupee that you pay as interest towards the loan adds to the cost of the loan.
The affordability of a personal loan depends on its interest rate. A higher interest rate automatically converts into higher EMIs. Determination of interest rate varies from borrower to borrower and depends on certain factors.
What are the factors that can affect your personal loan rates? Let us examine the top 5 factors –
- Your Income
- Your credit history
- Your employer
- Your Debt-Income Ratio
- Your relationship with the lender
Your Income
This is the primary factor for determining the interest rate on your personal loan. The lender needs to be sure that you can repay the loan on time. Since a personal loan is an unsecured loan, it is important for the lender to verify the repayment capacity before deciding the interest rate. The basic eligibility for a personal loan requires that you have a net monthly income of over Rs 30,000.
Your Credit history
Your credit history is your strength when it comes to the evaluation of your loan application. It is measured by the CIBIL score. The CIBIL score is a 3 digit numerical summary of your credit history. It is a number within the band 300-900 with 300 being the minimum and 900 the maximum. A score above 750 is considered very good and loan applications with this score are favourably considered. You might even be able to negotiate a lower interest rate if you have an excellent CIBIL score. On the other hand, if you have defaulted on your loan in the last 12 months your application may be rejected or the rate of interest increased.
Your employer
If you are employed with a reputed organization, you stand a better chance of negotiating a lower interest rate. Employees of renowned companies stand a better chance of being offered better interest rates since they have a stable career and the probability of defaults reduces.
Your Debt-Income Ratio
The real ability of a borrower to repay the loan is measured not by the salary but by the debt-to-income ratio. Debt- to -income ratio is calculated by dividing the total of your debt payments by your total income. This is a ratio calculated by the lender to calculate your financial health. If your debt-income ratio is high, the debt burden would be considered high and a higher interest rate would be levied.
Also Read – What is Debt to Income Ratio (DTI)? How Does it Factor in your Loan Eligibility?
Your relationship with the lender
If you have a long-standing relationship with your lender, you become a loyal customer. This relationship can stand you in good stead when you negotiate a lower personal loan interest rate for your loan. The lender may not want to disturb a long-term relationship and lose your business to a competitor. This could give you an extra advantage during negotiation.
Applying for a personal loan is easy. All you need to do is meet the basic personal loan eligibility criteria and you are ready to go. If you are an Indian citizen or resident over the age of 21 years and earning a net monthly income of over Rs 30,000, you are eligible to apply for personal loan.
LoanTap makes it very easy to apply for a personal loan. All you need to do is to fill an online application and upload the following documents –
- PAN Card
- Aadhaar Card
- Salary slips for the last 3 months
- Bank Statement of the Salary account for the last 6 months
The LoanTap team will assess your application. If your credit score is good and your documents are in order, the loan will be approved and disbursed within 24-36 hours.
LoanTap offers personal loans in the range of Rs 50,000- Rs 10,00,000 for a tenure of 6 months – 5 years. The Interest rates start at 18% per annum. You can choose your own repayment option based on your convenience. You can select the tenure to arrive at the optimal EMI. After you service the loan for 6 months, you are free to prepay the entire loan without any prepayment penalty.
Getting a personal loan is child’s play. You can negotiate with the lender for a better rate depending on the factors mentioned above. You can visit our website for more details. Whatever be your need, we, at LoanTap, are available to handle your problem. Just a few clicks and your financing problem will be taken care of. Take care of the factors mentioned above and get yourself the best rate available in the market. The cost of your personal loan is entirely in your hands.
Related articles – Guide to Different Types of Interest Rates – Flat vs Reducing Rate of Interest
