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What are the Personal Loan Interest Rates, and How to Calculate Them?

A personal loan provides you with instant financial assistance. But before transferring the funds to you, a bank or any financial institute has to borrow funds in order to make loans available to you. It could either be from other banks or the deposits made by the client. Personal loan interest rates are the combination of the costs a bank incurs to borrow money and the inherent risk of lending money without any collateral to personal loan applicants.

But the personal loan is the last part of the whole loan process. To get a personal loan, first, you need to know if you are eligible for it or not, and then you have to keep the personal loan documents required during the application ready with you. If you miss any of the documents or you are found ineligible for the loan, you may not be able to apply for it. To know about the loan documents and eligibility criteria, go through this information post.

Also read about commercial loan truerate services.

What is the personal loan rate of interest?

If personal loans are a kind of close-ended lending with fixed monthly payments made over a specific period of time. Personal loan interest rates are represented as a percentage of the amount borrowed by an individual as a loan.

Personal loan interest rates are calculated as a percentage of the loan. Now, personal loans are unsecured types of loans, which implies that the rate of interest on these loans is a bit higher than secured loans due to a lack of recoverable assets as security. The interest rate of a personal loan can be calculated using the interest rate calculator, which we will mention in the next section.

What is a personal loan interest rate calculator?

There are two techniques for calculating your loan interest rate. One is the fixed interest rate, while the other is the declining interest rate.

Flat Interest Rate Method: The flat interest rate technique charges the applicable personal loan interest rate on the total principal loan balance during the duration.

The decreasing/reducing balance: The interest rate in this method is determined by the outstanding principal sum. It implies that the interest on the outstanding balance is adjusted each time you make an EMI payment.

How to Know If I Am eligible to apply for a personal loan or Not?

The following are the eligibility conditions for a personal loan:

  • Age range: 21 to 58 years
  • Occupation: Applicants can be salaried or self-employed.
  • Monthly income: ₹15,000
  • Work Experience: A minimum of six months for salaried persons and two years for self-employed individuals in an existing firm.

What is the list of necessary documents for a personal loan?

Here’s a list of all the personal loan documents required before applying for a personal loan:

  • Mandatory documents: Application form and passport size photographs
  • Identity Documents: Passport/ License/ PAN Driver’s Card/ Aadhaar Card
  • Residential Documents: Passport/ License/ Ration Driver’s Card/ Utility Bill/ Aadhaar Card
  • Job Continuity Document: Letter of Employment from Current Employer and past employer experience certificate
  • Income Proof for Salaried Employees: Form 16, salary slip for the preceding six months, and bank account statement for the previous six months
  • Income Proof for Self-employed Individuals: Bank statements for the last six months and ITR for the previous two years
  • Proof of Residential Ownership for salaried individuals: Property Documents/ Maintenance Bill/ Electricity Bill
  • Office Address Documents for Sel-employeed Individuals: Property Documents/ Rent Agreement/ Maintenance Bill/ Utility Bill

How to Apply for a Personal Loan Online?

Look at the steps given below to apply for a personal loan online:

  • Browse your lender’s website.
  • Fill up the application form.
  • Attach the required documents online.
  • To complete the application process, the personal loan team will contact you.
  • That’s it! All that remains is for you to wait for the approval.
  • When the lender is satisfied with your application, they will transfer the loan amount to your respective bank account.

As you have reached the end now, all we want to tell you is to make sure that you have all the personal loan documents required with you in the given order and that you have a good credit score to get low personal loan interest rates.

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