Personal Loan Interest Rate: 7 Factors That Decide How Much You Pay

Skipping the Credit Report Check

Most applicants don’t even check their credit report while applying for the loan. But it can have many discrepancies like some loan account being closed but still reflected on your report or payment being wrongly reflected as overdue. All this affects your credit score and in turn your rate of interest. So, correct your report before you even begin the process of getting a loan.

Borrowing More Than You Need

While you might get approved for a higher loan amount, you might end up taking a higher loan amount when the lender offers you such. But it will result in a higher monthly payment (EMI) and overall a higher amount of interest payable.

Ignoring the Total Cost

If you are comparing loans based on the rate of interest, make sure that the total amount payable is also considered. There are processing charges, GST and pre-payment charges that can affect the repayment amount of your loan. Just take out a few minutes and calculate the amount of repayment on different loan amounts using the EMI calculator.

Choosing the Longest Tenure by Default

While a longer tenure keeps the payment amount low, you end up paying interest for a longer period of time. If possible, go for a shorter tenure to save on the interest cost.

Missing EMIs on Existing Loans

A missed EMI not only reduces your credit score but also makes it difficult to obtain loans in the future. So, make sure that all your EMIs are paid and on time.

Quick Tips to Get a Lower Rate

·        Ensure all your bills and EMIs are paid timely

·        Maintain less than 30% utilization of your total credit limit on cards

·        Have an eligible co-applicant

·        Consider at least three options before making a choice

Final Thoughts

Personal loan interest rate, after all, is nothing but an indicator of your own money management habits, which are changeable. Be aware of your score, borrow what you require, and shop around before borrowing.

In case you are looking for somewhere easy to start from, RuleMudra is here to assist you in this matter.

👉 Ready to find your best rate? Check your eligibility on RuleMudra today and take the first step toward a smarter loan.

FAQs

What is the ideal interest rate for personal loans in India?

The interest rate is generally between 10% to 24%, which depends on your profile. The interest rates on the lower side indicate you have a good credit score and income.

Is it possible to test my eligibility without impacting my credit score?

Yes. In most cases, platforms conduct a soft check of your eligibility, which doesn’t impact your credit score.