June 8, 2023


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5 aspects that impact the interest rate of your online personal loan

Have you ever wondered why different financial institutions offer online personal loans at different ¬interest rates? Banks can charge you variable interest rates even in this age of swift and easy loans. As personal loans are classified as unsecured loans, the interest rate that your lender applies depends on several criteria. The more positive these factors are, the lower will be the interest rate.

These are the 5 leading factors that can influence your personal loan interest rate:

1) Monthly income

Whether you are a self-employed or salaried individual, your monthly income is a vital factor when applying for an online personal loan. The general principle is – higher your regular monthly income, the lower will be your online personal loan interest rate. This is due to the established procedures of the lending bank who categorize high-earning applicants as being less probable to default on their monthly repayments.

2) Credit scores

Your credit score also assumes significance when it comes to the interest charged on your online personal loans. A higher credit score (of more than 750) is an excellent sign and can get you immediate approval for an online personal loan at a lower interest rate.

How is your credit score calculated? Multiple factors such as missed (or delayed) EMI payments on previous loans and loan defaults can negatively impact your credit score.

Also remember that if you have a less than optimal credit score, your personal loan application can even be rejected by the lender – or may be offered at a sky-high interest rate. While most banks consider 750 as an acceptable score to offer an online personal loan, a credit score of more than 850 can get you an average drop of 0.25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in your loan interest.

3. Employer reputation

Yes, the reputation of your employer is important in deciding the terms of the online personal loan. If you are an employee of a reputed company, you can get glowing contractual terms on your personal loan. The reason is quite simple – banks perceive employees of leading companies as valuable customers, and they go out on a limb to secure their financial business. If you have a stable job with a blue-chip company, you are least likely to default on repayments.

How do banks evaluate the status of your organization? They use multiple sources including “Top 1000 companies to work with” and “The best MNCs in India” and so forth.

You can use an instant personal loan app to find out more about the offer terms of the online personal loan and most importantly, whether you fit the eligibility criteria.

4. Loan payment track-record

Apart from your overall credit score, lenders also glance through your previous repayment history and decide on the loan interest rate. Previous repayment history if not blemished with defaults or a large number of late payments, will fetch you an attractive amount and competitive interest rate.

5. Relationship with the bank

The swing factor that can determine your personal loan interest rate is your degree and extent of loyalty to the lending bank. Most banks who have had a long and healthy professional relationship with existing customers – do offer them extraordinary privileges or attractive offers on personal loans to maintain a mutually-rewarding relationship with the loan consumers.

For instance, if you maintain a savings or salary account with a specific bank and have outstanding cash flow in your account and have repaid your past loans to the dot, the bank is most probable to offer you a concession of 0.5 to 1{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} on your online personal loan interest rate.


Before filling out online loan applications, you need to make an honest evaluation of the quantum of your credit needs and future income flows. You can compare the online personal loans offered by different lenders and choose the one that suits your present credit demands.

Disclaimer: This is a company press release. No HT journalist is involved in creation of this content.

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