Cash woes? A personal loan to the rescue!

    Best Personal Loan Interest Rates (2019)

    Personal loans act as your lifeguard when you really need some money. True to its name, this type of loan is very personal in nature as you can use it for absolutely any purpose, be it for your wedding or for repainting your home. These loans have competitive rates of interest and flexible repayment period. The rates of interest are decided based on various factors such as credit score, employment nature, etc.

    What is an Interest Rate?

    When you borrow funds, the lender will ask you to pay a percentage of the principal amount for using the money. This percentage is called the interest rate and it is calculated on an annual basis.

    How is my interest rate calculated?

    Interest rate for personal loans is calculated based on a range of factors and some of them have been explained above. Different banks use different methods for calculating the rate of interest. In most cases, it is a compound rate which is applied to the remaining loan amount along with all the fees and charges.

    Factors that affect your personal loan interest rate

    Your interest rate is calculated based on the following factors –

    • Amount of loan – This is the amount of money you borrow from the bank. Your rate of interest is indirectly proportional to your loan amount. If you borrow a larger amount, you will have to pay lesser interest.
    • Tenue of the loan – This is the time period for which you borrow the money. If you take the loan for a longer period, you will get benefits on your interest rate.
    • Current Market Rate – The current market rate of interest acts as the base rate based on which banks decide your rate of interest.
    • Credit report Assessment – Banks pay a lot of attention your credit report when you apply for a loan. Your credit score plays an important role in deciding your rate of interest. Banks tend to provide lower rates of interest to people with a higher score.

    These are a few important factors that have an impact on your personal loan interest rate. Apart from these, there are also other factors which play a role in deciding your interest rate such as the institution from which you are taking the money from as banks and other financial institutions do not offer the same rate of interest.

    How to Get Low Rates of Interest on Personal Loan

    The different ways to get a lower rate of interest are as follows –

    • Credit Score – To get lower rates of interest on your personal loan , you should ensure that you have a good credit score because banks provide lower rates to people with a higher score. A good score speaks a lot about you and assures banks that they will get back their money on time from you. So, check your credit report regularly and rectify mistakes, if you find any. Also, make your payments on time and clear off all the pending bills before applying for a loan. This will help you in increasing your credit score and getting a low interest rate.
    • Collateral – If you do not have a good credit score, you can provide a collateral security to the bank in order to get a lower rate. You must remember that this step will make your loan secured, which means that if you fail to repay your loan, the bank will take over your collateral.
    • Guarantor – You can also get a lower rate if you find a guarantor with a good credit report. Here, if you fail to pay off your loan, the bank will ask your guarantor to repay the money.
    Personal Loan Interest Rates

    There are other financial institutions and money lenders apart from banks that offer this type of loan in Singapore.

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