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Personal Loan Interest Rate
What is a Personal Loan?
A personal loan refers to a loan that is provided to the borrower without collateral or security. Unlike other loans like housing, business, or car loans, personal loans are not designed for a particular purpose and can be availed to meet any immediate need for funds, regardless of whether it is for an international holiday or for a child’s education or for renovating one’s home. Personal loans by Muthoot Finance are offered at the most competitive interest rates and can be customised to suit your individual requirements.
Personal Loan Interest Rate
The interest is an amount that the loan applicant is charged as a fee for being able to borrow the money. The interest is calculated annually and is a set percentage of the principal loan amount. The loan amount and the applicable interest are repaid by the borrower over a pre-decided period of time (loan tenure), in the form of equated monthly instalments (EMIs). Personal loan interest rates are generally higher as compared to other types of loans, as a personal loan does not require collateral against which the money is disbursed to the borrower. Generally, personal loans are offered with a fixed rate of interest, which means that the interest charged remains the same throughout the loan tenure, without being affected by economic changes in the market. Personal loan interest rates vary with different financial institutions and from case to case. The same lender may offer different interest rates to two applicants for a personal loan, based on their personal loan eligibility.
Factors that Affect Personal Loan Interest Rates
The interest rate that is offered by a lender for a personal loan is calculated on the basis of several factors, including:
- Nature of employment: The personal loan interest rate offered to an individual can vary depending on where they work. Salaried individuals working at well-established organisations have a greater chance of availing lower interest rates as compared to others. Salaried individuals have a fixed and steady income, which improves their chances of being able to repay the loan on time. As personal loans do not have collateral, the repayment capacity and capability of the borrower are very important factors for the lender.
- Collateral: While personal loans are unsecured loans, the applications for which are approved based on the financial stability of the applicant, individuals who are neither salaried nor self-employed can also avail a personal loan by Muthoot Finance. In case an applicant cannot show a steady income or good credit score, they can avail the personal loan against 100% collateral security at Muthoot Finance. The collateral can be in the form of Reserve Bank of India bonds, LIC policies, Fixed Deposit certificates, National Savings Certificates, or other tangible or government securities. If you avail the loan against 100% collateral, then the personal loan interest rate offered to you may also be lower. With collateral in place, the risk of loss in case of a default is reduced, which allows the lender to offer a lower interest rate as well.
- Credit Score: The Credit Information Bureau (India) Limited (CIBIL) score is a 3-digit number that reflects the creditworthiness of the individual. It is a summary of all credit transactions done by the individual in the past. The timely payment of any EMIs and one’s credit card bills ensure a high credit rating, which reflects that the person is less likely to default on their EMIs and can be offered lower personal loan interest rates.
- Having a Steady Income: A steady taxable income, generated from any source, gives the assurance that the individual will be able to repay the loan on time. That is why individuals who can show proof of steady sources of income, including their salary, pension, rent, interest income, etc., may be offered lower personal loan interest rates. The Employer: Individuals who are employed in the government or public domain or with reputed and well-established private sector players are considered to have a stable career, which also speaks well for their ability to repay the loan on time.
- Income Level: The level of income one earns is another important aspect that is taken into consideration when calculating the personal loan interest rate for an individual. How much a person earns is something that has a direct impact on their repayment capability.
- Debt-to-Income Ratio: Individuals are required to disclose all their existing loans and liabilities while applying for a personal loan. A comparison of how much they earn and the amount they pay every month to clear existing debts is called the debt-to-income ratio. A high income does not always guarantee lower interest rates as a high debt-to-income ratio can significantly impact a person’s repayment capability.
- Age of the borrower: While many lenders have an eligibility criterion regarding the age of the loan applicant, the age of the borrower can also impact the personal loan interest rate they are offered. Individuals nearing retirement have a smaller earning window, while individuals just beginning their careers may lack proof of financial stability and credit history. Such individuals are generally charged a higher amount of interest.
Get a Personal Loan with Ease with Muthoot Finance
With Muthoot Finance, you can rest assured that you will be able to avail the best personal loan interest rate based on your eligibility. A trusted name in India, Muthoot Finance offers numerous benefits like quick processing and loan disbursals and minimum documentation requirements. You can easily apply for a personal loan in person by visiting the nearest Muthoot Finance branch, or you can put in an application online on our website.
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Ask an Expert
CUSTOMER SUPPORT NO.:
080-35392825
(Mon-Fri, 10 AM to 6 PM)
WRITE TO US:
plcustomersupport@muthootgroup.com
BRANCH TIMINGS:
Mon-Sat, 9:30 AM to 6 PM
Ask an Expert
CUSTOMER SUPPORT NO.:
080-35392825
(Mon-Fri, 10 AM to 6 PM)
WRITE TO US:
plcustomersupport@muthootgroup.com
BRANCH TIMINGS:
Mon-Sat, 9:30 AM to 6 PM
FAQs
Interest rate is the annual percentage charged by the lender for the loan amount. It is calculated on the basis of credit score, credit history and loan amount. Interest is paid by the lender on a monthly basis. You can also use the personal loan interest rate calculator for India designed by Muthoot Finance to find out the interest rate on your personal loan.
Yes, personal loans charge interest on a monthly basis. The lender needs to make monthly payments towards the principal amount along with the interest charge until the end of the loan tenure. At Muthoot Finance, you can get the lowest personal loan interest rate if you have an excellent credit history.
Yes, personal loan interest charges may change in case you have chosen a floating interest rate. Otherwise, it remains the same throughout the loan tenure.
It completely depends on the lender from whom you are borrowing the loan amount. Different lenders have their own unique criteria to determine the limit on the loan amount. Usually, the lender takes certain factors into consideration such as the salary of the applicant and employment experience when sanctioning a low interest personal loan.
The main difference between the reducing rate and flat interest rate is that in reducing rate, the interest rate is calculated under the diminishing rate. On the other hand, a flat interest rate is calculated on the principal loan amount. Applicants can also use the personal loan rate of interest calculator to find out their exact interest rate.
You can check the total interest payout for your personal loan by multiplying the principal amount by the interest rate and the loan tenure.
Personal loan interest rates are fixed and floating. In the case of a fixed rate, the interest rate will remain the same throughout the loan tenure. However, in the case of floating rate, the interest rate may vary depending on the market conditions. At Muthoot Finance you can get the best personal loan interest rates.
Most financial institutions consider the applicant’s credit score when sanctioning a loan. You can certainly get a loan approval with a low credit score but it will be with a higher interest rate. If you are a salaried employee or self-employed person, a steady source of income plays an important role in getting approval for a personal loan.
Your employment history and experience help the lender to determine the personal loan interest rate. It shows that you will be able to pay the loan amount within the agreed time frame without any failure.
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