Factors That Play An Important Role In Determining Your Personal Loan Interest Rates

Financial stability makes for an important part of life. While you may strive to maintain a safe funds net against financial uncertainties, there are moments in life when the tough times hit hard. This is when a personal loan can help you make it through. The type of unsecured loan can be used to fund anything from a large purchase to fulfilling an emergency.

Reaching the right personal loan can seem like a daunting task. However, knowing of the essential factors such as the interest rate can help. You must be well aware of the aspects that determine the final rate of interest that you will have to pay. Here is a guide that will aid in understanding the factors that can work in your favor of attaining the best rates on personal loans.

Credit scoresThe credit score report is used as a major indicator of one’s ability to make timely debt repayments. It numerically proves how credit worthy one is. Lenders use the credit score when determining personal loan interest rates. A high credit score is likely to bring you a lower interest rate offering.

Employer details – As a salaried professional, there is a higher chance of not only having your personal loan approved but also getting better interest rates. Employees who can prove a consistent income and this reassures the lender of the scheduled repayments. This factor lowers the risk for the institution and they offer a lower rate of interest. Additionally, working in a well-known and reputed organization can prove that you have a reliable income and are likely to maintain your employment. This is yet another factor that will aid in securing a lower interest rate.

Relationship with the lenderFinancial institutions are likely to serve loyal customers with lower personal loan interest rates. Being mindful of your relationship with your bank or financial institution will help secure a more competitive rate of interest. The rate offered will not be standard and differs for every existing customer.

Age – The age of the applicant is an important factor that lenders evaluate when deciding on the interest rate. Typically, younger individuals are offered a lower rate of interest. Individuals nearing retirement are likely to be charged a higher interest rate in comparison.

It serves well to know if you meet all the above stated determiners when applying for a personal loan. This will ensure a smoother process with minimal possibility of loan disapproval.

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Author: Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.