All about current personal loan interest rates

Check out the current personal loan interest rates and the factors that can influence the interest rate at which you can avail a personal loan.
All about current personal loan interest rates
5 min read
26 July 2023

A personal loan, like other retail loans, is provided to individuals who have a regular source of income and require immediate cash to pay for their financial obligations. When the monthly repayment begins, financial institutions levy a certain interest rate on the principal amount.

The repo rate set by the RBI has a direct impact on the current personal loan interest rates in India. In a monetary policy meeting that was conducted on April 2023, the central bank decided to pause the consecutive repo rate hikes and maintain the benchmark repo rate at 6.50%. This turns out to be beneficial as a stable repo rate leads to stable borrowing costs for commercial banks, which may, in turn, result in steady interest rates for borrowers on personal loans.

There are multiple factors that influence the current personal loan interest rates. They not only for different lenders but also fluctuate as per the customers borrowing profile. Bajaj Finance Limited offers personal loans of up to Rs. 40 lakh with competitive interest rates starting at 11% p.a.

How is personal loan interest calculated?

Calculating the interest on a personal loan involves two main components: the principal, which is the borrowed amount and the interest, which is the cost of borrowing. The interest is determined as a percentage of the borrowed sum. Since personal loans typically do not require collateral, the interest rate is slightly higher compared to secured loans that involve pledging assets.

In a regular term loan, each equated monthly instalments (EMI) comprises both a principal component and an interest component. The fixed interest rate determines the EMI amount based on the chosen loan repayment period and the borrowed amount.
You can use our personal loan EMI calculator to further simplify these calculations. This tool allows you to check the precise EMI amount for your personal loan and assess the total interest you will pay over the loan tenure.
With Bajaj Finance Flexi Hybrid Loan you can pa you can pay interest-only EMIs for the initial tenure of the loan. In this instance, your initial EMIs will just include only the interest portion of your loan.

What are the factors that affect Interest rates on personal loans?

Several factors determine the interest rate on personal loans. Here are four important factors to keep in mind:

  1. Monthly income
    Borrowers with a larger monthly income are preferred by lenders since they are more likely to repay the loan on time. A higher income means that the loan will be more affordable. Bajaj Finance Limited offers personal loans to individuals who meet its simple salary eligibility parameters. If you reside in one of the metros, you must have a minimum salary of Rs. 25,001. Residents of other cities can avail themselves of a personal loan with a lower monthly salary.
  2. Credit score
    Credit score validates your repayment performance considering your previous loans and credit cards payments. Timely payments improve your credit score, while late payments or defaults can lower it. The CIBIL Score ranges between 300 and 900, with a score of 685 or higher considered a healthy score. A good credit score can lead to better loan terms from lenders, while a lower score may result in less favourable terms.
  3. Your employment
    Employment with a reputable firm holds greater benefits than you are aware of. Individuals working for esteemed organisations are perceived as more stable and responsible in paying EMIs promptly. Additionally, having a job with reputed firm for at least a year gives lenders confidence that you will be able to complete your payments on time. All of these factors lower your risk profile, which increases the likelihood that lenders will provide you with a personal loan at a competitive interest rate.
  4. The loan amount and tenure
    Larger loan amounts or longer repayment periods pose a higher risk for lenders, leading to higher interest rates. Smaller loans with shorter tenures are less risky, resulting in more favourable interest rates. Consider your financial situation and repayment capacity to find the right balance and minimise interest costs.

In conclusion, the personal loan interest rate plays a critical role in the cost of borrowing. Maintaining a good credit score is essential to secure the most favourable interest rate.

Bajaj Finance Limited provides personal loans up to Rs. 40 lakh, featuring competitive interest rates starting at 11% p.a. Reach out to us to explore the best deals when applying for a personal loan.

By staying informed and taking a proactive approach, you can secure a personal loan that suits your financial needs and capabilities.

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