Learn How To Calculate Personal Loan Interest Rates With Bajaj Finserv

Personal loan applicants may find it tricky to establish their overall repayment obligation. This is because the total repayment amount includes the loan principal and processing charges, prepayment charges/penalties, and the interest accrued. Calculating the total cost of your loan is tedious when done manually. Thankfully, the Bajaj Finserv Personal Loan Interest Calculator and EMI calculator make this task extremely easy to perform. But before we get into the details of personal loan interest rate calculation, you must understand the different interest rates and how they are levied.

Difference between Interest Rate and Annual Percentage Rate (APR)

 Using a personal loan calculator is a breeze once you know the difference between interest rate and 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 charges, including the interest rate. Hence, the APR comprises the interest rate, broker charges, loan processing fee, and prepayment penalties.

Flat vs. Flexible vs. Reducing Balance Interest Rates

 Once you choose the ‘personal loan apply’ option on the Bajaj Finserv website, you are likely to be offered one of the three following interest rate schemes: 

• Flat Rate – As the name suggests, the lending institution decides this type of interest rate at the time of loan commencement. This interest rate is fixed and does not change throughout the loan tenor. Using a personal loan interest calculator is straightforward when you are on a flat interest rate scheme. 

• Flexi – Unlike flat rates, Flexi interest rates are subject to change as per the ever-evolving Reserve Bank of India guidelines. Depending on the changes announced by RBI, a Flexi interest rate can be beneficial or detrimental to the borrower. 

• Reducing Balance Interest Rate – This is the most favourable interest rate calculation method that benefits the borrower. A reducing balance interest rate is applicable only on the remaining principal amount, reducing with each EMI. Even though the interest rate remains fixed, the overall payable interest keeps diminishing thanks to the reduced principal.

 How to Calculate Interest Rate on a Personal Loan

When applying for a loan, you would ideally want to avail of the lowest personal loan interest rate. This, however, depends on various factors such as your eligibility, the loan amount applied for, your credit score, age, currently ongoing loans, type of employment, and work history. Candidates who meet or surpass all the 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 a loan EMI calculator to examine the scheme. Keying in details such as your personal loan interest rate and the loan amount will help you arrive at a suitable tenor for repayment. A personal loan interest calculator will also give you the precise EMI amount you will have to pay throughout the loan tenure. This will help you plan and ensure that your repayments are not hampered by other essential expenses.

How to get a personal loan at the lowest interest rates

Factors that influence your personal loan interest rate are still under your control. Let’s check out how you can leverage these to get the best deal for yourself.

• Develop Positive Financial Habits: Not taking multiple loans simultaneously, under-utilizing your credit limit, avoiding delayed EMI payments, and maintaining a balance between your credit and spending limit are some ways to improve your credit score. Once your credit score is above 750, banks will consider you a reliable party and offer you the lowest personal loan interest rates without any fuss.

• Compare Interest Rates Online: Banks and lending institutions differ widely in the personal loan interest rates. While it is true that a personal loan from your existing bank would be convenient, you should always check around for lower interest rates from other financial establishments. Regularly checking the official website of all major banks, especially during the festive season, can pay a rich dividend if you chance upon a good offer.

• Never Underestimate the Power of Negotiation: If you fulfil all the eligibility criteria and have a solid CIBIL score, you can even haggle with bank officials for a lower interest rate. Most banks exhibit some flexibility in interest rates, particularly when the candidate’s credit history is unblemished.

Calculating 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 assess your loan plan in detail. Enter the tentative details of your personal loan, such as loan amount, probable interest rate, and tenor. The EMI calculator will compute your monthly instalments and the accrued interest. This simple but highly effective method for calculating interest rates and monthly EMIs will help you better understand your financial situation and prepare for the future.

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