Hidden Facts You Need to Know About Personal Loan Interest Rates

When it comes to availing any sort of loan, what is the first thought that comes to your mind? Well, many of us usually don't pay attention towards many parameters that play a pivotal role in your overall loan journey. And, among those parameters, one such important point that you should always keep in mind is the interest rate as it can either make or break the situation for you. Yes, you read that absolutely right my friend! Now, when we say loans, it would not be wrong to say that personal loan, being an unsecured loan type is easy and quick to avail as compared to others. So, it is important to keep personal loan interest rates in mind before saying yes to it.

If we talk about the interest rates, there is no denying the fact that different lenders offer different rates to the borrowers and it generally ranges between 11.59%-25% per annum. Now, the higher this value is, the more EMI and interest you need to pay in order to repay your loan. And, vice-versa. Let's just do one thing, take an example below and try to get more clarity on the same. For example-Rakhi Arora, A Senior Sales Manager wants to avail a personal loan of ₹5,00,000 so as take her family on a vacation in Singapore. Now, 2 lenders are ready to offer her the same loan amount for a tenure of 4 years but wait a minute. One is offering her the amount at an interest rate of 11.59%, while the other is at 15.50%. Now, those who don't understand the game of interest rate, must be wondering how it's gonna make a difference? What is the difference between both the scenarios?

Let's just use the EMI calculator and compare both the scenarios and see how its gonna create a difference for Rakhi.

Scenario 1

Loan Amount: ₹5,00,000

ROI:11.59% per annum

Tenure: 4 Years

Now, the results in this scenario would be:

EMI:₹13,066

Interest Outgo:₹1,27,191

Overall Amount Payable:₹6,27,191

Scenario 2

Loan Amount: ₹5,00,000

ROI:17.50% per annum

Tenure: 4 Years

Now, the results in this scenario would be:

EMI:₹14,557

Interest Outgo:₹1,98,745

Overall Amount Payable:₹6,98,745

As you can clearly see how the difference in interest rate can be a game changer for her. With lower rates, she needs to pay less amount of EMIs as well as interest. The difference comes out to be of ₹1,491. Though the difference in EMI is not higher, but if you look at the interest outgo, it would come out to be ₹71,554. Suppose, if the interest is more than that, the EMIs and interest both will increase, hence she might end up paying more. So, this is how a change in ROI can make a big difference in her overall loan journey, especially in the long run.   

Well, buddy the catch here is to say yes to the lender who is offering the said amount at a lower rate as it will reduce your burden in the future. Yes, the lower the rates are, the less EMIs you need to pay from your pocket each month to repay your loan. Not only this, in fact, your overall interest outgo will also be reduced in the future, hence making your journey smooth and memorable.  

Now, that you know how rates play a crucial role in Rakhi's case, thus neglecting the same will not be beneficial as it can make a hole in your pocket too. However, one thing that needs to be mentioned here is the fact that whenever you avail a loan, it is one commitment that you need to fulfill till you repay the same. It is a liability on you, hence availing the same without doing any homework can take a toll on you. So, always compare and search for the best lenders, who offer you the loans at attractive rates so that you end up grabbing the best deal.

I guess now you completely understand how keeping an eye on personal loan interest rates can be a boon for you in the future as it can help you in making your overall loan journey a memorable affair. So, hope you will keep the above points in mind and be careful in the future :)