Personal Loans – Interest Rates
The repayment of the EMI on the loan taken depends on the terms of the loans and the applicable interest rates. The interest rate is basically a yearly price that is charged by lender from a borrower for obtaining a loan. It is usually expressed as a percentage of the total loan amount taken. In India, interest rates are regulated by the Reserve Bank of India (RBI) which is the central bank of India. The RBI can adjust the interest rates for promoting growth depending on the factors such as inflation and current economic conditions. The rate determined by the RBI forms the basis for how retail banks fixed the interest rates for their consumers on loans.
There are basically two types of interest rates including fixed rate and floating rate. A fixed rate is the interest rate that remains same during the complete tenure of the loan irrespective of the current market conditions. It does not change as per the changes in the market rates. Personal loans and other short terms usually have fixed interest rate. On other hand the floating rate is the interest rate that changes based on the existing market conditions. Most of the long term loans such as home loans have floating interest rate.
If you are going to avail a personal loan then you should understand the type of rate applicable for your loan. You should know what type of rate you will be charged and if it gets changed during the tenure of the loan. You should also review your interest rate periodically as it may change in case of floating rate. You can get a loan at cheaper rate if the interest rates come down. You should also compare and negotiate the interest rates offered by the various banks as it vary from one bank to other bank.
Related posts:
- Personal Loans – Lending Rates and Repayment Period
- Personal Loans Against the Fixed Deposits
- Personal Loans – Alternatives to Personal Loans 2
- Personal Loans – Alternatives to Personal Loans 1
