What rising Personal Loan rates mean for borrowers

5 MinsJan 17, 2023

What rising Personal Loan rates mean for borrowers

Having a sound financial plan is essential to achieving financial goals. Even with careful handling of finances, you may fall short of funds. This could include weddings, home renovations, dream vacations or medical expenses.

A personal loan can be of great assistance in these situations. With a personal loan, you can achieve your goals without depleting your savings.

In December 2022, the Reserve Bank of India (RBI) raised the policy repo rate to 6.25%, leading to a rise in interest rates on bank loans.

Due to rising interest rates across the financial system, borrowers will likely face higher equated monthly instalments (EMIs). Therefore, you may need to adjust your financial strategies to stay on top of your finances.

There may be a further increase in EMIs for existing borrowers who have taken out loans at a floating rat

Nevertheless, you can still get a personal loan at a competitive interest rate. Let's first understand how personal loan interest rates are decided.

What determines the interest rates for Personal Loans?

1. Income and employment history:

Your annual income is the most significant factor in determining personal loan interest rates. Most lenders consider factors such as employment history, stability of employment and residence stability. Lenders also consider your repayment capabilities and debt-to-income ratio while determining the interest rate. For instance, if you are a government or private sector employee working in a reputed organisation and have a stable employment history, you will get more favourable interest rates.

[Also ReadChoose a personal loan interest rate that fits your pocket]

2. Credit Score:

Your credit score is the most crucial factor for loan approval. In the case of personal loans, it plays an even more significant role because it affects the interest rate.
A credit score of 750 or higher is considered favourable by most financial institutions. Calculating the credit score involves evaluating your income, debt, borrowing behaviour and repayment history. A higher credit score reinforces your creditworthiness, resulting in lower loan interest rates. The timely repayment of EMIs and credit card bills contributes to a good credit score and establishes you as a trustworthy borrower.

3. Age:

Your age can influence interest rates. Interest rates may be higher for those nearing retirement.

4. Existing relationship with the bank:

If you have an established relationship with the bank or financial institution, you are likely to qualify for a personal loan at a lower interest rate. The lender is more likely to offer you a better offer if you demonstrate loyalty. They can also customise plans according to your needs.

Finding the right bank for best Personal Loan rates

Several factors determine whether a personal loan is right for you. Interest rates are one of them. Other factors to consider are an easy approval process, quick disbursements, processing fees, etc. You can achieve all your goals with a personal loan from Axis Bank.

Axis Bank offers personal loans from ₹ 50,000 up to ₹ 40,00,000 with minimal documentation and speedy approval. You can choose a tenure between 12 to 60 months.

  • Max loan amount: ₹ 40,00,000
  • Max loan tenure: 60 months
  • Interest rate: 10.49% to 21%
  • Processing fees: 1.5% to 2% of loan amount + GST

Axis Bank offers an interactive Personal loan EMI calculator that helps you calculate monthly loan repayments for better financial planning. Find out more about personal loan eligibility online.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.