personal loan in Kolkata

If you are planning to apply for a personal loan in Kolkata, be aware that it is a form of unsecured loan provided by a lender. The lenders would not ask for any mortgage or collateral from you but charge a high-interest rate and can repay back in EMI (Equated Monthly Instalments). In fact, personal loan interest rates are among the highest, compared to other types of loans. So, it would be good if you borrow from a lender who offers a personal loan at a low-interest rate along with shorter terms or repayment periods. Read on to know about the conditions that you have to fulfil for getting the loan at low-interest rates.

Personal loan interest rates usually vary between lenders and are also based on the borrower’s status. Lenders offer lower interest rates to borrowers with high credit scores in most cases. Usually, the rates vary depending on certain factors that include the following:

  • Income

Your income is the main deciding factor in your personal loan interest rates. All lenders consider that people with high disposable income have a greater repayment capacity than those with lower incomes. So, they lend funds to people with high and stable disposable income at lower interest rates on their loans. For borrowers with lower income levels, the rates are usually high.

  • Your Credit Score

Credit score has an important role in both loan approvals and interest rates. The credit score considers the overall financial condition of an individual in terms of income, existing debt, borrowing behavior, and past repayment history. A high credit score would increase your chances of getting loans at lower interest rates compared to others. For example, a score of more than 750.

  • Status of your organisation or employer

Personal loans are unsecured, so, lenders look for various factors that assure the borrower’s credit worthiness. They may consider the status of your employer and if you work in a well-known organisation, they assume that you would be more financially solvent than others and make timely payments. The personal loan finance companies may sometimes have much more relaxed lending policies if you work with certain organisations.

  • Debt-to-income Ratio

Debt-to-income ratio is the ratio of all your debt payments divided by your total income. The lenders would check whether a major part of your salary is going into debt repayments. This would affect the interest rate. A higher debt-to-income ratio means you have a high debt burden and the lender may charge a higher interest rate on your loan due to this reason.

  • Your relationship with the Lender

Lenders are more flexible in charging lower interest rates if you are a trusted client. If you have been a past client or are currently associated with the lender and have been trustworthy so far, you may get a personal loan at a low-interest rate. However, it requires a long period of time to achieve this reputation.

  • History of Defaults

The lender would check for defaults in your credit history and charge you a very high rate of interest or might even reject your loan application if the default. Most lenders prefer applicants with zero defaults over the past 12 months.

If you compare the interest rate with business loan interest in India, you will find that business loans are lower as most of them are with collateral. So, the lenders are at a lower risk and can claim the collateral or mortgage if the borrower fails to repay back the amount.

Lenders also have certain requirements of eligibility for applicants. These criteria may vary but the standard requirements include:

  • You have to be a salaried employee or a self-employed individual having a steady source of income
  • A minimum net monthly income cut-off as specified by the lender
  • If you are self-employed, disclose the number of years that the business has been operational.
  • For business owners, proof that the business is profit-making, projected cash flows for the next couple of years, its financial viability, etc.
  • Ensure that you have a good credit score. You can do this by making your loan payments on time like the credit card bills, monthly loan instalments, etc.
  • A lender will charge processing fees, stamp duty, and other regulatory fees. There may also be a pre-payment or pre-closure fee. Make sure to go through the different charges that may be imposed before you apply for a loan.

Last Words:

You can avail a personal loan in Kolkata at low-interest rates if you fulfil certain conditions required by your lender. Banks and finance companies take strict measures to avoid the risk of non-repayment by borrowers in the case of personal loans. One of the measures that they adopt is high-interest rates. This is because personal loans are unsecured and they cannot claim any collateral to make up for the losses.

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