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Personal loan interest rates need not be the same for every individual. One key factor that determines your interest rate is your credit history

Written by Adhil Shetty | Published:January 16, 2012 2:32 am

Can banks offer different interest rates for the same amount of personal loan?

—Sanjay Shankar,Mumbai

Personal loan interest rates need not be the same for every individual. One key factor that determines your interest rate is your credit history,which is basically a record of your past repayment of loans and credit card bills. Also,there is a central repository where such data from all the banks on existing loans and their repayment patterns of their customers are accumulated. This data is currently available with the Credit Bureau of India (CIBIL) and will soon become available with other credit agencies like Experian,Equifax etc. which have been granted licenses to operate in India.

Before approving your loan a financial institution always checks with a credit bureau. A good repayment track record has its benefits. It could fetch you a higher loan amount at a lower interest rate as it is standing proof for your money management capabilities.

I urgently need a personal loan of Rs 2 lakh. However,my monthly income is only Rs 15,000. Will I get the loan?

—Akanksha Upadhyay,Lucknow

If your monthly income can accommodate the loan,you should not have any hassles securing it. One of the primary requirements when you opt for a loan is that your EMI (equated monthly installments) should not exceed 40 – 50 per cent of your monthly income factoring in your monthly out-go for your other loans if any as well.

Assuming you don’t have any other loan,you easily meet the requirement. It also helps to run a quick check with other eligibility requirements specific to the bank you approach for the loan.

Why do credit card companies allow minimum payment?

—Sameera,Delhi

The date for the minimum payment due allows you to pay up a small amount upfront and this is usually in place to avoid a late payment fee for lack of funds. However,as a practice ensure that you pay the total amount due before the minimum payment due date to maintain an impeccable credit score.If you are in the habit of paying only the minimum amount due,interest will accumulate and spiral out of control.u

—The expert is CEO,Bankbazaar.com
For your personal finance queries please email at expressmoney@expressindia.com

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