Personal Loan Interest Rate

The different types of personal loan interest rates are as follows:

• Fixed or flat interest rate

As the name suggests, the personal loan interest rate doesn’t change throughout the loan’s tenure. The lender would issue a fixed rate when approving the loan, which is pre-communicated to you.

This method is preferred because it avoids the chances of ambiguity and larger payment in the future. The interest rate is calculated on the whole amount of the personal loan you have applied for.

• Adjustable or floating interest rate

Contrary to a fixed rate of interest, the lender issues a loan at a variable interest rate, which might change during the loan’s tenure. The changes are made as directed by the policy for loans under the Reserve Bank of India.

It is also called a reducing rate of interest since the idea here is to benefit from the changing policies. However, there is no guarantee that the rate of interest will reduce with the loan’s tenure.

The outstanding amount gets reduced, and the interest is always charged upon it. That is why “adjustable” interest rate is a more appropriate name for this interest rate.

Knowing how much interest you would have to pay on your personal loan even before you get it is a great relief.

In the case of reducing interest rate models, you do not get that luxury. Though you can end up paying less if the interest rate recedes, you might have to pay more if it doesn’t. If you are okay with that uncertainty and want to put your bets on a low interest rate, you could go for a variable interest rate. However, a fixed interest rate is more stable and less ‘surprising’.

There is no “one-size-fits-all” when it comes to money matters and loans. We recommend you go through both the models and evaluate what works better for your particular financing need.

When it comes to looking for loans, applicants often seek out low-interest personal loans. However, the lowest personal loan interest rate may not be in your interest. There may be hidden charges which can make the loan overall more expensive. So, while you are looking for a personal loan, the desired interest rate must not be your only parameter.

Nonetheless, If you are looking to apply for a personal loan, here are a few tips that will help you avail a lower rate of interest:

• Clear your dues punctually.

How is your credit score calculated? The lender usually considers your previous track record of clearing outstanding dues on your existing loans or credit cards. Defaulting on those can affect your future loan permissions.

• Improve your CIBIL or credit score.

While factors like age, salary, etc., that significantly help reduce the interest rate may not be in a seeker’s control, you can still control your creditworthiness. Your CIBIL score is a measure of that.

A credit score greater than 750 denotes a highly credible citizen who is most likely to repay on time. At Kotak, we prioritize such applications and even grant them the lowest interest rates.

For those who have a credit rating below 600, not only is getting a personal loan difficult, but it is also far more expensive.

• Save with offers!

Around the festive season, Kotak offers great discounts and special offers, particularly on personal loans. Be on the lookout!

• Ask us.

Kotak is dedicated to helping you fulfill your goals. We value trust and relationships above all. Especially for customers who have lasted long with us, we are always willing to make an exception. And if you have successfully received and repaid a past loan with us, you have the edge over other applicants!

However, even if you’re new to the whole thing, we are happy to meet you over a virtual coffee. Get in touch with us, apply, let’s talk it out. Let us together build the future of your dreams on your terms.