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What Is the Interest Rate on a Personal Loan?

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Kushi BL
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What Is the Interest Rate on a Personal Loan?

 The interest rate is the rate applied over the borrowed amount by a bank or NBFC (Non-Banking Financial Corporation). One of the most important factors that you must consider before getting a personal loan is the interest rate.

Personal loans can be used for a variety of purposes such as paying off for marriage, medical expenses, renovating your house, supporting your child’s education, or even paying back an existing loan.

Loan aggregators meet the right bill with the borrower's profile. They help ease your repayment process. Buddy Loan does have an amicable interest rate starting at 11.99% p.a.

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If you are planning to apply for a personal loan in different banks, make sure to compare their rate of interests before settling on any offer.

Types of Interest Rates on Personal Loans

Two different types of interest rates that may be applied to personal loans. These include:

 

  • Fixed Interest Rate

If you have a loan with a fixed interest rate, your rate of interest would remain constant throughout the tenure of the loan. This means that your monthly EMI would also be the same throughout the period of loan repayment. This type of interest rate is useful for planning your monthly expenses in the long run.

 

  • Floating Interest Rate

If you get a loan with a floating interest rates, your rate of interest will constantly keep changing depending on the current market conditions or the internal benchmark decided by the bank. As a result, your monthly EMI will also fluctuate and may increase or decrease with each month.

Interest Rates for Different Borrowers

Most of the lenders take different factors into consideration for deciding the rate of interest for a particular application. Let us examine how the interest rate of a personal loan varies depending on the type of applicants.

Self-Employed & Salaried Professionals

Whether the borrower is salaried or self-employed affects the interest rate to a great extent. Salaried employs with a stable career record with reputed organizations usually get personal loans at a much lower interest rate that an applicant who is self-employed.

 

 This is because the lenders believe that someone with a steady income and job security has better ability to pay back the loan amount. However, self-employed professionals with a good credit score and healthy bank record can obtain personal loans at competitive rates as well.

 

Women

A large number of banks tend to provide preferential interest rates to female applicants. This is done to promote female salaried professionals and entrepreneurs to be financially stable and fulfil their dreams.

 

Pensioners

Pensioners also have special personal loans meant specifically for their category. These loans are also usually provided at lower interest rates, especially from public sector banks. This is especially true in cases where the applicant’s pension account is held with the same bank as the loan applications

 

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