When taking a personal loan, you may find out that your rate of interest is very different from what other people taking the same amount as you are charged. There are various factors that affect the rate of interest lenders charge on personal loans online. You may need to call the info center when looking for a loan online so as to find out more information about the loan you are trying to obtain. Why then is the difference in the rates of interest when obtaining a loan online?
Well, the first thing that determines the rate of interest is the credit score of the borrower. If you have ever defaulted in a loan before, you may have a lower credit score. Your credit rating affects your rate of interest in that if you rank higher on your credit score, you can get a loan on a lower interest rate. However, if you rank lower on the credit rating, then your loan attracts a higher rate of interest because you are considered a high risk person. Online lenders compensate for the risk they take of lending to bad credit people by charging a higher rate of interest.
Another thing that determines the amount you will be required to pay as interest is the size of the loan that you take. If you take a smaller loan, you get charged a higher rate of interest unlike when you borrow a bigger loan. The rate of interest will also depend on the lender. Different lenders will opt to charge different rates of interest on their loans. Similarly, the period within which you will repay the loan will determine the rate of interest. If you choose a shorter period for repayment, you will then attract a higher rate of interest. On the other hand, if the period of repayment is longer, then you add points to your rate of interest because you are charged a lower interest rate.