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Introduction to Personal Loan: Personal Loan is an unsecured debt which can be availed by any borrower at the lowest interest rates. In the recent scenario, every person is availing personal loan for meeting their personal requirements. This is because, the income of the average earning person is low as compare to their expenses. Only few people avoid themselves for getting the unsecured loan. Thus, it is important for the person to know about the calculation of interest rate and repayment options before applying for a loan. Who is eligible for getting a Personal Loan? The customer is whether salaried or self employed, both profile people can apply for the Personal Finance, but must have good salary and excellent capability of repayment. For this, borrower has to show their source of income and employment details. In case of salaried person, they have to show his last 3 months salary slips and Form 16. In case of self employed person, they have to show last 2 or 3 years ITR and CA certify profit & loss account and balance sheet. What are the interest rates charged by different banks? The different financial institutions provide different Personal Loan Interest Rates. This is because; each bank has its own terms and conditions to calculating the interest rate. The various methods are: 1. Fixed Rates If the borrower avail, personal finance at a fixed rate; then customer has to pay a large amount of money back, than the customer has applied. This is because the rate of interest in this case never gets reduced. The interest rate is calculated at initial principal amount only. Thus, the person ends up paying more money in flat rate than from other methods of calculating the interest rate. 2. Floating interest rate The floating interest rate changes with the change in the market fluctuation. It is highly risky technique; as the interest rate goes up if the market rate goes high. The person ends up paying a large amount, or small sum of amount depends entirely upon market rate. Though, the interest rates in floating rates are normally low. 3. Reducing Balance Interest It is advisable to the borrower to go for this method of the interest rate, as the interest rate keeps on reducing with the reducing the principal amount. This is the best way of calculating the rate of interest is cheaper than from the fixed rate.
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