We all know that a personal loan can act as a financial boon in times of difficulties. Personal loans are very popular in India; as a result, the competition to offer the best personal loan interest rate has become very strong. So, what are interest rates and what affects them the most? The interest rates are expressed as APR (Annual Percentage Rate). It defines the charges that are levied on the borrower by the lender for availing a loan. The interest rate on personal loan is governed by the Central Bank based on an assortment of factors such as the market and political scenario of the country.
Factors that Influence Interest Rate on Personal Loan
Apart from the Central Bank, there are a pleathora of factors that influence personal loan interest rate. A prime factor is the competition among lenders. Due to the increasing popularity of personal, lenders offer attractive personal loan interest rate to ensure that the borrower avails loan from them.
Additionally, the type of personal loan also influences the interest rate on personal loan. For example, if you were to apply for a car loan at a bank, then you can get a loan for as low as 9.30%. However, if you were to apply for personal loans that the interest rate could be as high as 35%. You can use the online EMI calculator for personal loan to determine the personal loan interest rate and EMI.
The list of factors that affect interest rate on personal loan are:
- Tenure of the loan
- Schedule of repayment
- Age of the applicant
- Income of the applicant
- Credit score
- Financial and credit history
- Nature of employment
- Amount of the loan
- Liabilities of the applicant
The formula to calculate personal loan interest rate is:
Interest = Loan Principal*Interest Rate (on a monthly basis)
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