Business Finance

There are many factors that go into determining what interest rate a person is offered when they apply for an auto loan. Employment history, credit score, current interest rates, and income all play a role in what type of loan a bank or financial institute offers. Should any of these factors change over the course of a car loan agreement, a person may want to consider looking into car refinancing as it may help them save hundreds of dollars a year. Refinancing a car loan may help certain people save considerably on their auto loan payments.

Car refinancing helps people who have entered into a high interest car loan. Interest rates are ever-changing. This means people who are entering into a loan agreement are taking a chance that the interest rate they are locking into is the best that they will get at that current time. This is great when interest rates are low, but when interest rates are high people can be locked into a high interest rate loan that ends up costing them hundreds of dollars. Refinancing a car loan allows these people to find a new vehicle loan at a lower interest rate.

People who have significantly improved their credit score can also benefit from car refinancing. A person’s credit score can play a major role in what car loans a person is offered. A low credit score can make banks and financial institutes reluctant to loan that person money. This reluctance causes many creditors to offer high interest car loans to people with low credit scores as it allows them to recoup any money that might be lost as a result of people defaulting on the loan. If your credit score has improved since you applied for a loan, an auto refinance may allow you to qualify for new lower interest loans.

Not everyone will benefit from refinancing an auto loan. People who are locked into a low interest auto loan or those who have almost paid off their car loans may not benefit from a refinance. However, people who purchased a car when interest rates were high, or those who had low credit scores and have since improved their credit score, may benefit from car refinancing. The best way to determine if you will benefit from an auto refinance is to obtain quotes from banks and financial institutes and compare that to what you are paying now to see if you will save money.

Taking personal loans is becoming a norm for the middle class Indian today. With expenses sky rocketing and salaries moving at a slower pace, there is little one can do to avoid the debt of personal loans. Be it for the further education of one’s child, purchasing domestic appliances, renovating and repairing one’s house, meeting the expenses of special occasions and weddings; the need to borrow a considerable sum of money is being felt amongst almost all strata of the society. It is thus important to understand the repayment options and to know how the interest rates on personal loans are calculated.

Personal loans for salaried and self-employed individuals

Individuals who are salaried or self-employed and can show a considerable flow of income, suggesting the high possibility of repayment over time, can apply for a loan. The status of the company where one is working, credit history of the person applying for the loan and his/her relationship with the bank issuing the loan are the few other considerations for getting a loan grant. Based on the status on each of these, the individual can negotiate for lower interest rates and in waiving off processing fee etc. The best part of a loan is that it can be obtained without the need for any kind of security or collateral, and has a simple process of application and documentation.

Loan rates are varied

Personal loan rates vary across different banks. The range of interest rates on loans is between 12% and 15%. There are different methods of calculating interest on loans. Depending on what the bank has put on offer, and what mode of calculation is suitable for the person taking the loan, a method of interest rate calculation is decided upon.

The different ways of calculating interest rates on personal loan are:

Flat rates – Getting a loan on a flat interest rate is paying back much more than one otherwise would. As in a flat rate calculation, the interest is calculated on initial principal amount throughout the tenure of the loan, the outstanding loan amount is never reduced. Thus, one ends up repaying much more than one would through different kinds of interest rates used for calculation

Reducing balance interest - Reducing balance interest is advisable to go for, as it works out cheaper than the flat rates. In this method, the interest on the loan amount keeps on reducing as it gets calculated on the regularly reduced principal amount.

Floating rate – The floating rate of interest changes as per the market dynamics. It is a high risk repayment method – one can end up paying much more or much less than the amount budgeted for. However, floating rates are offered at lower rates than fixed rates. Thus, a borrower of loan at a floating interest would highly benefit if the market dynamics make the interest rates go lower.

There are other charges on the loans as well. Processing fees and prepayment charges are a part of every loan.

Depending on the bank one deals with, one’s requirement and the relationship one shares with the bank, the best personal loan interest rates can be established.