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If you are planning to apply for a Personal loan, the first and prime factor which comes to mind is the interest rates offered by banks. It plays a vital role in determining the total cost of borrowing. As personal loans are unsecured loans, the rate of interest is always on the higher side as compared to the secured loans. Lenders are at more risk when they lend personal loans because the borrower is not required to put any kind of collateral as security.

There are various lenders offering personal loans and the interest rates also vary from every lender. It is crucial to compare the interest rates before applying for a personal loan. Different banks and NBFC’s have different criteria while offering interest rates for personal loans. The criteria for salaried and self-employed individuals also differ from bank to bank.

Axis bank offers personal loans at attractive interest rates. If you are seeking personal loans from Axis Bank, you will be required to fulfill the following eligibility criteria.

Individuals/Borrowers who can avail personal loans from axis bank are:

•Employees of public and private limited companies, salaried doctors.

•Employees of the Government sector, including public sector undertakings, central and local bodies.

•Age: The minimum age mandatory for Axis bank Business loan or personal loan application is 21 years. The maximum age required at the time of loan maturity is 60 years.

•Income: The minimum net monthly income required is Rs.1,80,000 per year.

•Loan Amount: The maximum loan amount is 15 lakhs.

•Salaried individuals must have completed at least 2 years of service in the same organization.

•Axis bank provides personal loans only at some given locations and (Delhi, Noida, Gurugram, Ghaziabad, Faridabad, Bangalore, Hyderabad, Ahmadabad, Kolkata, Pune, Chennai, Mumbai, and other locations) the eligibility for a personal loan differs based on those locations.

•EMI Calculator: You can easily calculate the  personal loan EMIs using a personal loan EMI calculator. This calculator helps you in determining the every month EMI outflow including the interest rate. It is beneficial in planning your future expenses, before applying for the personal loan.

•CIBIL score: Credit score/ CIBIL score is an important factor for the approval of your loan. Usually, an applicant’s creditworthiness is determined by evaluating his credit score and the previous financial history must need to be better to get a loan at good interest rate and make it easily available. Otherwise, the loan application of the applicants having poor credit score may get rejected.

Let’s analyze the factors that play a role in deciding the personal loan interest rates.

1.Your past history of credit

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The very first point which the lenders take into account in approving or rejecting the loan application is your CIBIL score. CIBIL report has the track record, validating your past financial borrowings. This information is provided to banks by credit bureau companies. Low CIBIL decreases your chances of loan approval, while a higher CIBIL score above 750 wins the loan approval easily. If the bank approves the loan application of individuals with low CIBIL in certain instances, the interest rate charged to them will be much higher. The reason for offering the loan amount at such a high rate of interest is to minimize the risks involved in them.

2.Your negotiation skills 

If you are an existing account holder with the same bank, you may find it easier to get the loan approval. Long-time relationship with the bank puts you in a position to negotiate on the interest rates, fees etc charged by the bank. Having a long -term account with the bank, works in your favour turning you to be an esteemed customer in the eyes of the manager and other staff.  You can leverage this opportunity to negotiate for the interest rates. There are high chances that the bank will either lower your interest rates or will offer some interesting deal.

3.Your monthly income

If you are drawing a  low monthly salary, you  will be offered higher interest rates to minimize the risk factor. Low salary is an indication of the low capability to repay the loan amount, while applicants with higher salaries are marked as safe repayers of loan. According to lenders, your monthly income is directly proportional to the capacity of repaying the amount.

4.The organization you work for

Working for a reputed and stable organization plays an important role in determining the interest rates of your personal loan. The lenders consider the applicants of stable organizations, having career stability and income. Whereas an applicant working with a small company or startup is likely to get a personal loan with high-interest rates. This is because the lenders will be unable to predict the stability of the company and the income to its employees. Therefore, mentioning the name of your organisation on the loan application is deemed to be very important.

5.The loan amount and tenure

Both loan amount and tenure also plays a prominent role in deciding the interest rates for your loan. If the loan amount and tenure are higher, the interest rates will be lower and vice versa. You can take the help of EMI calculator and check an estimate of your outgoing amount as EMIs. You will be presented with a rough figure, which will help you in deciding before applying for the loan.

6.Your Debt to income ratio 

FOIR or Fixed Obligation to Income Ratio is a popular parameter used by lenders to determine the repayment capacity of a borrower. Along with credit score, lenders will evaluate your repayment capacity of the loan. Based on this, it is decided whether you are eligible to avail of a loan or not. As per the parameter of FOIR, you will have to limit your fixed obligations to 50% of the  income. It implies that 50% of your obligations or liabilities are within the range and with the rest amount you will be able to pay the installments of the present applied loan.

If you can handle the personal loan effectively, it is one of the best financing options to meet your urgent monetary requirements. The best part of availing the personal loan is that the funds you get as cash can be utilized as per your convenience.

However, it is important to bear in mind, the above stated factors before applying for a personal loan, to avail it at the best interest rates.

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