Personal Loan Rates differs with banks and many other factors. Firstly, there are three types of interest rates
Fixed interest rates
Floating interest rates
In the fixed and floating interest rates the reducing balance method is used for determining the EMIs whereas in flat rates this method is not used, therefore flat rates is the most expensive of all. In the fixed interest rates the interest rates remains same as that determined while giving the loan whereas in the floating interest rates, the rate of interest changes with the market conditions and other such factors.
Rate of interest for a particular loan is determined by many factors related to the individual taking the loan. The main factors that determine the rate of interest for a particular person are
Income status – By income status it means whether the applicant is a salaried man or self-employed, his job type and his amount of income. The rate of interest for salaried persons is lesser than self-employed person as salaried persons are considered as more likely to repay the loan than self-employed persons. Also, the person with higher salaries are more likely to repay their loan on time therefore their rate of interest is lower.
Company status – Company status is whether the company is fortune 500 or a multinational company or big company or small company or government employee. Employees of different type of companies will be given different rate of interests. The individual working as a government employee or in a MNCs or Fortune 500 companies are considered safer in repayment of loan than any other type of companies.
Credit history – Credit history is the record of previous loan repayments and credit card payment. A good credit history is when a person has paid all his loan and credit card payments on time and vice-versa for bad credit history. A person with a good credit history is more likely to get a personal loan at lower interest rate and faster than a person with bad credit history.
Person’s relationship with the bank he is taking loan from is also an important factor. By relationship with the bank it means whether the person is applying for the loan from a bank where he has a savings/current account for long time or not. If the person is applying for the loan from a bank where he has a savings/current account for long time with good account status, he is more likely to get the loan cheaper and faster.
Person’s negotiating ability can help him get loan with less processing fees and even a lower rate of interest.
Depending on all these factors explained above, the rate of interest can vary from 12% to 32% from different banks.