Personal loan applicants may find it difficult to establish their overall repayment obligation. This is because the total repayment amount includes the loan principal and processing fees, prepayment fees/penalties, and accrued interest. Calculating the total cost of your loan is tedious when done manually. Luckily, the Bajaj Finserv Personal Loan Interest Calculator and EMI Calculator make this task extremely easy to accomplish. But before getting into the details of calculating personal loan interest rates, you need to understand the different interest rates and how they are charged.
Difference Between Interest Rate and Annual Percentage Rate (APR)
Using a personal loan calculator is a breeze once you know the difference between the interest rate and the annual percentage rate (APR). While the interest rate is simply a percentage of the principal amount charged by the lending institution, the APR is a set of fees including the interest rate. Therefore, the APR includes the interest rate, brokerage fees, loan processing fees and prepayment penalties.
Fixed, flexible or decreasing interest rates
Once you choose the “apply for personal loan” option on the Bajaj Finserv website, you will likely be offered one of three interest rates:
- Package – As the name suggests, the lending institution decides this type of interest rate when the loan begins. This interest rate is fixed and does not change for the duration of the loan. Using a personal loan interest calculator is simple when you are on a flat interest rate plan.
- flexible – Unlike flat rates, Flexi interest rates are subject to change in accordance with ever-changing guidelines from the Reserve Bank of India. According to the changes announced by RBI, a Flexi interest rate can be beneficial or detrimental to the borrower.
- Interest rate on declining balance – This is the most favorable interest rate calculation method that benefits the borrower. A declining interest rate is only applicable on the remaining principal amount, decreasing with each EMI. Even though the interest rate remains fixed, the overall interest payable keeps decreasing thanks to the reduction of the principal.
How to calculate the interest rate on a personal loan
When applying for a loan, you ideally want the lowest interest rate for a personal loan. However, it depends on various factors such as your eligibility, loan amount requested, credit score, age, outstanding loans, type of employment and work history. Applicants who meet or exceed all criteria are more likely to be offered loans at the lowest interest rates.
Once you have a personal loan offer from a lending institution such as Bajaj Finserv, you can use an EMI loan calculator to review the program. Entering details such as your personal loan interest rate and loan amount will help you arrive at an appropriate repayment term. A personal loan interest calculator will also give you the exact amount of EMI you will have to pay throughout the life of the loan. This will help you plan ahead and ensure your repayments aren’t hampered by other essential expenses.
How to get a personal loan at the lowest interest rates
The factors that influence your personal loan interest rate are always within your control. Let’s see how you can take advantage of this to get the best deal for yourself.
- Developing Positive Financial Habits: Not taking out multiple loans at once, underutilizing your credit limit, avoiding late EMI payments, and keeping your credit and spending limit in balance are ways to improve your credit score. Once your credit score is over 750, banks will consider you a reliable party and offer you the lowest personal loan interest rates without any hassle.
- Compare interest rates online: Banks and lending institutions differ significantly in personal loan interest rates. While it is true that a personal loan from your existing bank would be convenient, you should always check for lower interest rates from other financial institutions. Regularly checking the official website of all major banks, especially during the holiday season, can pay off big if you come across a good offer.
- Never underestimate the power of negotiation: if you meet all the eligibility criteria and have a solid CIBIL score, you can even negotiate with bank officials for a lower interest rate. Most banks show some flexibility with interest rates, especially when the applicant’s credit history is spotless.
Calculation of your personal loan interest rate and EMI liability beforehand is recommended to avoid defaulting on your loan. You can use the online personal loan interest calculator on the Bajaj Finserv website to evaluate your loan plan in detail. Enter your provisional personal loan details, such as loan amount, likely interest rate, and term. The EMI Calculator will calculate your monthly payments and accrued interest. This simple yet highly effective method of calculating interest rates and monthly EMIs will help you better understand your financial situation and prepare for the future.
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