What Is a Personal Loan?
A personal loan is an ‘unsecured’ loan, which means you do not require any guarantor or collateral in order to avail the loan. A personal loan could come in handy in times of a financial crisis like a medical emergency, loss of job, or it could be used to take a luxurious vacation, or fund a child’s wedding or studies. However, it is important to note that personal loans are among the most expensive loans. They come with the highest interest rates since they are 'unsecured' – the lender has no collateral as safeguard in case of customer default. The interest rate on a personal loan could range from as low as 11% to as high as 32%. It is influenced by a variety of factors including your credit score, income, employment stability among others.
Personal Loan Interest Rate
Whether you are thinking about getting a personal loan, or are shopping for personal loans, the most important and deciding factor is its interest rate.
• In order to land the best deal on a personal loan, you need to make sure you have a healthy credit score.
• Your credit score is the single most important factor that lenders look at when approving your loan.
• A credit score of 750 and above would ensure you land a loan offer at attractive terms and interest rate.
• If you have a good credit score, you are in a stronger position to negotiate for a lower interest rate.
• A lower credit score means you will have a more difficult loan approval process and might be offered stricter repayment terms like a higher interest rate or shorter tenure.
Compare Personal Loan Interest Rates
Once you ensure you have a good credit score, you can use an online personal loan comparison website in order to research the various personal loan offers. Don’t rely on only one site for comparison. If you are an existing customer of a bank and have a good relationship with them, then check if you will get any preferential rates as an existing customer. Make sure to check with your current bank before approaching new lenders.